How do you plan to manage your growth? You could increase your line of products and services. That’s the easiest option.
But if you’re serious about growth, it is important to look at expanding into new markets. Your local market might not be big enough to be viable. Another benefit of expansion is getting lower costs as there could be economies of scale. This is one of the secrets behind CRN’s Fast 50.
Expanding into new markets requires market research. How do you begin? Start with your existing customers. Talk to them about what they know about the markets you are looking at. You should also talk to suppliers and vendors.
As part of that market research, smart companies analyse several make-or-break issues. These include the market’s size, the growth so far and projected, the competitive environment and consumer preferences within that market.
That means doing complete due diligence on the new market. What are the strengths and weaknesses of the market? Is there room for your products and services? What is the size of the potential customer base? What about the competitors? Who are they, how much market share do they have and what are they offering that you’re not?
It is also important to ensure you have the cash flow to fund the time and cost of breaking into this market. Extra costs associated with the move would include new employees, distribution and legal costs. At the same time, the regular expenses of the existing business will still need to be met.
Many companies pick up this intelligence by tapping into their supplier and other networks, getting good information about the challenges and learning from the experience of others.In that process, it is critical the company identifies the risks of expansion. Don’t assume there won’t be stuff-ups. Companies expanding into new territories tend to make mistakes and they are the same every time.
First, they neglect the home territory. They get distracted and neglect the existing business and that often results in them losing customers. The existing business, or the home base, needs to be kept running efficiently and profitably. It is important to ensure the business in the new territory does not siphon resources from the existing business.
This often happens when the business moves too soon. It needs to be well-established first so that there is enough time and money. If the business has scope to grow further in the existing market, it might be sensible to wait a while before moving into new territory.
Another mistake is assuming competitors will just sit back and let the new business in. They will strike back. If they are large incumbents, they will do things like offer heavy discounts, bundle up other services into their offerings and lock customers into long term contracts.
Experts advise to take a problem-solving approach. Every market, including the one you’re looking at, has its challenges and problems. Identify the problems and work out what solutions the business can provide. When people ask you why you are moving into the market, you will say you have identified a need and a solution that your competitors can’t provide.
Let the local and industry media know you’re a new player in the market. Tell them about problems you have identified and ways you will solve them.
Once you enter the new market, build a database of potential clients. Your current database is a good start as that could have people on it who cover both markets. It is important to attend events in the new market. Get to know the council and attend any function they put on, even provide them with discount or perhaps pro bono services.
Join associations and create an online presence. Position yourself as a thought leader in the new market. Write pieces for the local papers on key issues affecting the market, set up a blog and send out a weekly newsletter to clients on your database. It’s a strategy that gets your name known. People will think of your business when looking for a service.
It pays to have a strong e-commerce infrastructure and advanced fulfilment capabilities that will position your company to deliver products and services to new markets. But in the final analysis, word of mouth is still a powerful and useful tool for helping you enter those markets.
Think laterally. Think about your company not in terms of what it sells. Instead, focus on the solutions it provides. You might even consider joint ventures with a company that offers related solutions that could be packaged with your own to serve both companies’ customers better.
A vendor selling the technology would be the perfect partner. Set yourself up as that vendor’s agent, and it could generate new business. The revenue such a joint venture creates may be greater than either partner could have generated when operating on their own.
Expanding into new markets will invariably mean a loss of control. Expansion will often force the business owner to be less hands-on. This means delegating more power and passing on more knowledge. Failing to delegate usually reduces the chances of success.
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