How to expand your business into new markets
Follow these three steps to improve your chance of success when it comes to expansion.
At some stage in the business lifecycle, you might consider expansion, whether it's opening a second location in a new market or reaching out to an entirely new demographic. But how can you know if it's the right move — and the right time? These three steps can help you improve your chance of success when expanding into a new market.
1. Look for new market opportunities
There are plenty of ways to identify new market opportunities. Here are three ideas:
Talk to customers. Expansion ideas can come directly from your customers who say "I wish you had a location in X," or "I wish I could buy your product at X store." Give them a chance to provide feedback: Conduct interviews, offer your email address, or send anonymous surveys.
Read online reviews. Listen to what's being said about your business on social media. Review your social platforms for positive and negative feedback, and check out your competitors' channels to look for market trends.1
Analyze website metrics. Review your website's analytics for any changes in demographics. An increase in visitors and purchasers from Florida, for instance, might signal a new market opportunity there.
2. Analyze potential new target markets
Before expanding your business into a new market, determine if it will be a good strategic fit.2 Answer questions such as:
How will your new customers differ from existing ones?
What is the competitive landscape for the new market?
How well will you be able to serve the new market?
Is there a real need for your product or service in the new market?
How much are new customers willing to pay for your product or service?
The more the new market opportunity aligns with your existing strategy, the lower the expansion risk — and the greater the likelihood that you'll find a good fit.
3. Assess your current capabilities
Once you've identified a new market and performed a thorough market analysis, assess your internal capabilities. Ask yourself about:
Your core competencies: Consider which core competencies you can leverage. Expansion is easier and safer when you can leverage your current business rather than building an entirely new one.
The return on investment: Because it costs money to expand, you'll have less money available for other transactions. Consider the potential return on investment from the new market and how long it will take to restore your capital.
Your branding: Expansion can leave businesses — and owners — spread too thin. Growing too quickly can drain your resources, and expanding can dilute your brand if you don't serve the new markets expertly.
Expanding into a new market involves risk, and you may not see results overnight. But with the right combination of commitment, planning, and management, you can help ensure the right move and the right timing.
As your business grows, learn more about your business lifecycle to help you manage the transition.
1 "Discovering New Market Opportunities with Social Media Data." Fourth Source. (2014) http://www.fourthsource.com/social-media/discovering-new-market-opportunities-social-media-data-17030
2 "How to Safely Expand Your Small Business." Intuit QuickBooks. (2013) http://quickbooks.intuit.com/r/money/how-to-safely-expand-your-small-business/
"5-Step Primer to Entering New Markets." Inc. (2013) http://www.inc.com/karl-and-bill/5-step-primer-to-entering-new-markets.html