Managing growth can be as taxing to a small-business owner as managing employees. Any type of growth creates change in the company and brings different financial, managerial and legal challenges that increase risk.

Nevertheless, most entrepreneurs aspire to build their small businesses. Some are interested in expanding their existing markets, while others want to enter new markets.

Which type of growth will be right for you? If your goal is to achieve sensible, logical growth, you'll want to balance your expansion plan with flexibility. Otherwise, you'll miss out on promising market opportunities and be less adaptive to changes in the marketplace. Franchising, licensing and distributorships or dealerships are three possible ways to grow an already healthy small business.

Franchising is an option for some product and service companies that can't finance internal growth. Franchisees share the risk of expanding market share, because they're committing their own capital and resources to model satellite locations after the existing business. However, there are many state and federal regulatory issues around the offer and sale of a franchise.

As with franchising, licensing enables a business owner to spread the risk and cost of developing and distributing a product. Licensing typically falls into two categories: intellectual property, such as computer software and high technology; and merchandise and character licensing, which deals with trademarks and images. In the second type, the name, logo, symbol and/or character is the "property," while the actual product (a toy, for example) becomes the "licensed product."


One way to bring a manufactured product to the marketplace is through independent, third-party distributorships and dealerships. A distributor buys the product from the manufacturer - your small business - at wholesale prices and resells to a retailer or directly to customers. Your controls over the dealer must be minimized to avoid the business being categorized as a franchise, which entails more complex regulation.

All forms of growth have specific legal regulations and some variation in the amount of control you'll have over the other party. To learn more about these and other vehicles for growing your business, contact the SCORE Association, counselors to America's small businesses.
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