How small businesses grow

Others may not tell you but every entrepreneur idealizes “being their own boss.” And the good things about this concept only get realized when small businesses grow.

There are no formulas to how small businesses grow though. The best that life gives you, and I and everyone else are dilemmas. You get to pick a course of action over others. Sometimes you can’t go back to your decisions and have to deal with the consequences of what you chose.

One small business dilemma is on how to grow it. You may have a salon and decide to open an M-Pesa outlet to go with. You may have a salon and decide to buy more hair dryers. Which is the better choice here? There has to be a right choice, no? I mean, if everyone is right then nobody is right, right?

The first alternative

The first alternative is diversification. You’ve definitely come across it in personal finance. If you were not being told to put your investments in different baskets I’m sure you were advised to have “multiple streams of revenue.”

In your small business, diversifying helps you increase revenue by exposing you to different customers. You will have some customers for salon services and others for M-Pesa transactions, going by our example. And this helps you minimize risk. Such that, if government taxes on mobile money transfers reduces M-Pesa transactions you can fall back on salon activities. It all makes sense.

Another thing is that you may have other skills that you want to put to use. You can create new opportunities for yourself by starting secondary businesses around them.

The problem for small businesses in diversifying is the danger of losing focus. This happens in two ways. Your secondary M-Pesa business may, for a period, make more money than your salon operations. This forces you to shift attention to the money. It can also happen that your M-Pesa businesses doesn’t make as much money and instead eats into your salon revenue.

Switching attention between both your business ideas can over-extend you; sometimes because you don’t have the management skills to manage everything and other times because you are only human.

The second alternative

With those problems in mind, is specializing better for you? If you focus on only the one thing you will be better placed to control quality. This is because you learn new ideas and from your mistakes much faster as there is only one thing in front of you.

Focusing on quality means you have to worry less about competition. The more difficult a things is to do, the less likely that many people will do it. It all makes sense.


Another reason it looks better is that your business will become more efficient. You can coordinate work easily and reduce business cost.

As good as this sounds, there is the danger that you could lose your flexibility. This is one of the advantages of being a small business. What would your salon business do if your County or a Ministry came up with some silly new regulation? What if the average spending per customer went down?

Your choice

You should not stress out too much. Any of your decision will have both advantages and disadvantages. The grass always looks greener. The key is going by the alternative that best fits your situation.

If you are in a high growth industry or business then it may be wiser to specialize. This is because all the opportunity you need has already filled your plate. If your business is in a moderately growing industry, you have to diversify. It’s your best bet to create new opportunities for yourself. But you must invest in proper management of all the different things you wish to do.

So, how do you know whether an industry is growing fast or slow?