For many entrepreneurs, growth is seen as a clear marker of success. However, for South African SMEs, expanding too quickly or for the wrong reasons can slow momentum and dangerously overstretch resources.
“Growth shouldn’t be a leap of faith, but rather a strategic move grounded in data, operational readiness, and sound financial planning,” says Nicole Swart, Managing Director at Merchant Capital.
“Every business owner wants to grow, but not every business is ready, and growth comes with its own set of challenges,” she explains. “We’ve seen entrepreneurs double their stock, hire additional staff, or open new branches after just a few strong months—only to find themselves overwhelmed. Growth is exciting, but it’s also costly. Without the right foundation in place, it can unravel the very progress you’ve worked so hard to achieve.”
Having worked closely with entrepreneurs and SMEs to support sustainable growth, Swart outlines three key questions every small business should ask before committing to expansion.
1. Is There Enough Consistent Demand to Sustain Growth?
Many SMEs mistake a short-term spike in sales for long-term growth. Whether it is a seasonal bump, a tender, or a once-off corporate order, short bursts of revenue can be misleading. Swart advises entrepreneurs to look beyond the moment.
“You need to uncover your average revenue patterns. The data can be surprising. It is not uncommon for a business owner to overestimate growth based on one good quarter, when the longer trend tells a different story,” she adds.
Consistent customer demand is the first marker of readiness. If your customers are returning, if your base is growing, and if there is a clear appetite for expanded offerings, then it might be time to scale. But this decision should always be rooted in real trends and customer behaviour, not gut feel alone, and whether the sales growth can be sustained.
2. Can Your Infrastructure Support Expansion?
Scaling places new demands on people, processes and technology. Even businesses with strong demand can struggle to deliver if their systems are not built to cope with higher volumes.
“Ambition tells you where you want to go. Systems get you there. But scaling puts pressure on every part of your operation. If your team, suppliers, or back-end processes cannot keep up, it is going to show,” says Swart.
She encourages SMEs to identify their first bottleneck. “It might be obvious, like needing more space. But it could be more subtle, like a manual booking system that cannot handle growing volume.”
The key is to plan investments in the right areas at the right time. Not everything needs to be upgraded at once, but weak points must be acknowledged and prioritised.
3. Can Your Cash Flow Handle the Growth Gap?
Perhaps the most overlooked aspect of expanding is timing. Growth requires spending upfront on stock, marketing, equipment, or new hires, while revenue from that growth often lags behind.
“This is what we call the growth gap. Even small delays in customer payments or supplier deliveries can create a cash crunch at a critical time. And one missed salary or supplier payment can hurt your reputation,” continues Swart.
To prepare, she advises SMEs to model their cash flow scenarios, cut unnecessary costs in the lead-up to expansion, consider offering early payment incentives, and if needed, look into how short-term finance can bridge the growth gap.
Scaling Your SME: Strategy Over Gamble
The most successful SME owners do not scale on instinct alone. They look at demand, test their infrastructure, and plan for the financial realities of expansion. They do not chase growth for growth’s sake, but prepare for it.
“As an SME looking to expand, perfection should not be the expectation. However, you should have a clear sense of potential and a solid strategy to build on,” concludes Swart.
