Establishing a lucrative business is one of the most difficult ventures that any entrepreneur can take up. Doing so while also involving one’s family, on the other hand, brings the whole endeavor to the next level of complexity. After all, maintaining the professional focus while juggling personal relationships can be incredibly challenging.
Those who succeed, however, will have an opportunity to work with their loved ones while growing their operation.
So, what happens when it is time to expand a family-owned business? In other words, why is it so important to pursue this expansion as early as possible?
The most obvious reason to expand any business is the potential for increased revenues. After all, selling products to a larger client base yields more earnings that will translate to higher year-end profits. Thus, the company will be able to retain more of its cash flow which can be used to raise salaries, build new facilities, and hire additional staff. According to a CEO of Vista Realty Partners, Eduard J. de Guardiola, this is exactly the reason why the majority of organizations pursue expansion in the first place.
Ability to Hire More People
One of the benefits of having a multifamily business is the fact that any growth can be translated to added positions within the company. That means that more family members may become eligible to work for the entity.
What is the benefit of growing the number of workers who have these types of ties to the business? Well, it allows the business to enjoy a high level of trust that is only possible when people are related. Not to mention the undoubted loyalty that will come with every new worker who knows that the livelihood of their family depends on the success of the company.
Larger Market Share
As businesses expand, they are going to take over more market share. Generally speaking, there are two ways to achieve this.
The easy way is to seek geographical expansion into new states or countries. For example, when a U.S.-based business goes to a foreign country, it is expanding its market share by the portion of the new area that it enters. The other way is to start competing with local opponents more and offer something that they do not. That way, people will be inclined to make a switch and the company’s local market share will grow.
Given that the market share grows, the influence that the company has will be equally as noticeable.
Think about the way that conglomerates like Bank of America and Chase dominate the financial sectors. By being some of the largest banks in the world, they are able to do things like dictate prices, set the industry’s trends, and more. The same is similar for product-based businesses. Good examples of those are Apple and Samsung whose phones pretty much dictate the prices for the rest of the market.
Well, when multifamily businesses expand, they will grow their influence over the rest of the market. According to Eduard J. de Guardiola, this could mean going from a price to a differentiation leader. In translation, it would mean that the company can stop cutting down its prices to keep up with everyone and solely focus on delivering a unique product that can cost more.
Buying Power and Reduced Costs
Although it may sound counterintuitive, expanding the operation often leads to reduced cost per item. This is a byproduct of an increasing buying power where companies will be more likely to order supplies in bulk.
With the vast majority of manufacturers, something called the bulk discount will come into play. So, the business will be able to slash its prices per item produced by increasing the volume of production.
It is practically a win-win situation that, as long as it goes as planned, will set the company up for success in the long-run!