Have you ever thought if you are operating the right size business? The right size for a business varies with the industry. The right business size is the size where business has the most competitive advantage. Depending on the industry a business could best serve its customers as either being small or big. Being the wrong size for your business can cause bankruptcy. For example, a business owner starts a business that becomes successful. The business owner was able to grow the business to 7 million dollars. Now the business owner wants to grow by expanding territory, to attain this the business owner will have to incur additional costs which was not necessary at the $7million dollar level. So every new dollar that comes in, the business is going lose more money. This is called failure due to success. You become so successful, that it causes you to fail. In some industries, the in-between phases between small and big can drive a business owner out of business. To cross between small and big, the business owner will need to jump and will need lots of financing to do this.

A business of the wrong size pays a heavy price: A business that is too small for its size has the operating costs of a big business but reaps the advantages of a small business. If a business is below the minimum size required by its industry, it cannot succeed regardless of how good its product is. The fixed cost involved in operating the business requires the business be a certain size before it can reach profitability. A business in this phase may want to think of acquiring other small businesses to attain its optimal size.

Before expansion examine how this will affect the way you do business and your cost structure. Sometimes scaling back could be the best way to leap forward: It might be better to have a replicate of small stores in multiple location than having one central store serving multiple locations.