The right time to expand your business into a new market depends mainly on your reasons for doing so. Your business should only look to take on an extra burden if there is a clear opportunity and, more importantly, it can afford to expand into the space concerned.
Tackling a new area means taking on an added burden, so you need to assess the risks carefully. The last thing you want is for your expansion plan to fail and your business to lose money in the process. There are, therefore, a few key questions to ask before going for it.
Do Your Research
Research is the first and most important thing to do before expanding into new markets. You need to know what your customer base wants and how to provide it. This means asking them for their feedback and looking for common themes in their answers. If, for example, you run a software business, you need to see if your customers would welcome you launching a new product. You don’t want to expand to offer a new product that your customers don’t want or need.
Your research should also involve a market analysis. What do you hear customers asking about on the shop floor? Do your staff tell you about specific things that customers ask about? The answers to these questions could reveal the direction your business could take. Additionally, you need to be sure you are equipped to take on the extra work. Expansion could mean you need to hire more staff or train your current staff with new skills, and these things come at a cost.
Make Sure It’s The Right Time for an Expansion
It’s crucial in business to not bite off more than you can chew. Expanding your business too early could backfire and mean you end up back at square one. Before you start expanding, your business needs to be doing well in the space it’s currently in.
You need to be either making enough money to finance an expansion or have access to the kind of capital you need to fund it. Making your move before you’re ready isn’t advisable and you must consider multiple factors and conduct various stress tests to ensure you are in a position to expand without financial risk.
An expansion can take time to start producing results and might lose your business money in the short to medium term, so your business needs to be making enough money in other places to cover any potential losses. This is why it’s important to not jump the gun. Taking your time, assessing the risks, and planning contingencies takes longer, but your business is much more likely to be able to weather any potential storm that may occur.
Other Things to Consider Before Expanding Your Business
What your competition is doing will, of course, be a consideration. It doesn’t necessarily mean you’re too late if your competition is already present in the market you want to expand into. It could be a benefit to your business, as you are able to assess how your competition is doing and use them as a benchmark on which to expand. Maybe there’s an extra angle they haven’t exploited, or perhaps a way of improving what they offer.
If this is the case, it means there’s limited urgency for your business to jump into the gap, and you can take your time to think of how your business can offer your customers something new.
If you are the first to spot the gap, and your competition hasn’t yet moved in with their own plans of expansion, there is more urgency as you don’t want to get beaten to the post. In these circumstances, you need to rely more on gut instinct and business acumen to dominate the area before competitors can split the market.
You also need to be sure that there is sufficient demand to support your expansion. While your business might currently have an abundance of customers, you need to be sure that the area you want to expand into also has a reliable customer base. Not taking the time to assess this could result in your expansion failing before it’s even started.
Your expansion strategy should target new clients or, alternatively, aim at exploiting additional demand through targeted marketing.
The Shortcut to Expanding Your Business
The obvious way to expand your business is through building, whereby you move into a new space and seek to dominate the market over time. There are, however, other ways to go about an expansion.
You could buy a business that’s already providing the services you want. For example, you could buy a software company that already offers the product you want to launch and has a good reputation for doing so, which would allow your business to dominate the area almost overnight. This method of expansion is expensive, and using the build method will almost certainly be cheaper, but it does offer a shortcut if you want results fast.
Another alternative is partnering. This could involve working with a business in your area to expand together; sharing both the risks and the costs. Using the software company example, this would involve teaming up with another professional developer and moving into a new business area together.
Alternatively, you could work with a customer generation company like TFLI. Working with us allows you to start work in a new market without the requirement to do any marketing setup; you could just run a test and see how well it works for your business. Business expansion is our bread and butter, and our experts have the critical insights to help you stay ahead of the curve.
The solution we provide is also easily scalable so, if your business’s expansion starts to work, you can expand it further by using us to find you more leads. By providing a simple and flexible way to first test and then grow into new markets, Commercial Experts are ready to help you take your business to the next level.
