Is now a good time to expand your business?

Strategic advice

Tips for speeding business growth in an uncertain economy

During times of economic uncertainty, business owners can take one of two approaches: Ease off the gas by putting expansion plans on hold, or put the pedal to the metal and look for ways to grow their business.

The second approach might sound counterintuitive, but times of economic uncertainty like this may present the best opportunities for business growth. In fact, some of today’s most recognizable businesses were started during times of economic slowdown or even recession—think Uber in 2009, Microsoft in 1975, and FedEx in 1971.

Different methods for growing your business

George Calfo, managing director, Mergers & Acquisitions, with Truist Securities, says he has talked to business owners who are thinking about expanding their companies now. “Some businesses are managing quite well right now and are remaining focused on strategic expansion,” he says. “Strategies might include expanding your geographic footprint or your product and service lines.”

Businesses can expand organically or via acquisition, explains Patrick Stevens, head of Healthcare Corporate and Investment Banking at Truist Securities. “These times of economic uncertainty tend to work in favor of stronger and better-capitalized companies that are demonstrating organic growth,” he says. Organic growth strategies include optimizing internal processes, reallocating resources, and rolling out new product and service lines.

The current economic environment might also be a good time to grow by acquiring other companies. “Generally speaking, valuation multiples have come down,” says Stevens, “so the ability to acquire companies more cost-efficiently can present itself during times like this. We’re talking to a number of companies that look at this as a great time to play offense.”

But in the current economy, an acquisition strategy is all about being very focused and taking less-aggressive risks. When looking for acquisition candidates, many companies are double-clicking on what they already know and leveraging their core competencies to expand instead of taking risks on unrelated businesses.

“In some cases, we’re seeing companies actually divest themselves of non-core business units and redeploy the cash proceeds around their core operations,” Stevens adds.

“Generally speaking, valuation multiples have come down, so the ability to acquire companies more cost-efficiently can present itself during times like this. We’re talking to a number of companies that look at this as a great time to play offense.”
—Patrick Stevens
Head of Healthcare Corporate and Investment Banking, Truist Securities


Why expand during a time of uncertainty?

There are a few reasons why expanding might make sense. For starters, there may be less competition as other companies cut back on marketing and advertising. You might be able to take advantage of the weakened competition to gain new market share.

Shifts in the job market might also present opportunities to hire talented but recently laid-off employees who would be more difficult to attract during boom times. These employees could provide the experience, knowledge, and expertise you need to take your business to the next level.

Do’s and don’ts for business growth in today’s economic environment


Do: Create a business growth plan.

To grow during times of uncertainty, you’ll want to make adjustments to your business plan. Along with broader economic conditions, your aims and motivations for expansion should dictate the shape of those changes.

“If you’re expanding because you’ve spotted weakness in a key competitor, then the question most must answer is, ‘Is it more efficient to buy or build that particular capability?’” says Calfo. “With that at the core of your growth plan, there’s a better chance you’ll be prepared, focused, and flexible—even if aspects of the economy are shaky.”

Do: Calculate costs in detail.

There’s a price to growing your business in terms of the resources needed to accomplish your growth goals. Generally, it’s an equation of reward opportunity, risk tolerance, and timeframe that needs to be solved. For example, you may need to hire more employees, buy or lease new equipment, purchase more inventory and raw materials, invest in marketing and advertising, or acquire more office or warehouse space. Calculate how much expansion will cost and determine how you’ll pay for it, such as by taking out a business loan or taking on an equity investor.

“If you’re expanding through M&A, the headline cost of the acquisition could be cheaper,” says Stevens. “But you also have to take into account the increased cost of capital in this rising-rate environment.”

Don’t: Blindly raise prices to fund expansion.

Customers generally become more price-sensitive during economic uncertainty and more aware of the value offered by products and services.

“Raising prices may be unavoidable to support underlying cost and labor increases,” says Stevens. “Ultimately, continuing to deliver a valuable and differentiated work product to the customer is a must.”

Remember that value is in the eye of the beholder, so it might be smart to ask your customers what they think is valuable and what isn’t.

Don’t: Neglect your existing business.

In other words, don’t bite the hand that feeds you. When executing growth strategies, owners and managers sometimes lose focus on their existing customers, which can lead to lost sales and falling revenue.

Part of determining whether expansion will be a benefit or a risky endeavor is being honest about your ability to evenly split your focus. If the deal has the potential to lead to distraction, you risk jeopardizing operational excellence in your core business.

Do: Spend to deliver top-notch customer service.

This is one way to make your business stand out from the competition and boost customer loyalty, both of which are critical to growing a business. Calculate what you plan to spend to provide great customer service. For example, you may have to invest in technology to free up employees to spend more time serving customers, budget for employee training, or even build new physical or digital spaces for customers.

“In times like these, you absolutely cannot afford to be underinvested in customer relationships,” says Calfo. “Anyone who isn’t working to strengthen them is going to have a tougher go of maintaining, let alone expanding, their business.”

Getting started

There is risk involved in expanding your business at any time, but it may be elevated during times of uncertainty. Will the rewards be worth it? Your Truist relationship manager can partner with you to understand where your company is in its business lifecycle and assess the potential benefits of pursuing a growth strategy in the current economic environment.

Considering expanding your business?

To find growth strategies that work in today’s economy, download the Truist Purple PaperSM “Transforming macroeconomic uncertainty into opportunity” or contact your Truist relationship manager.