Many business owners had to put their expansion plans on hold over the last few years due to the global pandemic’s many and sudden negative impacts. Now, though, many entrepreneurs feel it’s the right time to look for ways to grow their business and help it cement its place in the market.
One way this can be done is via expansion into a new area. You might be thinking of starting to sell your products or services in a nearby state or even one on the other side of the country. If so, here are some suggestions for strategically building your business.
Consider If You Have a Scalable Business Model
First, consider if you have a scalable business model. There’s no point spending the time, money, and energy on expanding if you find that things become too much when you’re in more than one location. Think about how you’ll feel once you have an additional office, warehouse, etc., to manage and if you’ll have enough resources to meet all the extra requirements (such as sales, operations, human resources, and admin) that come with expansion.
Will you need to hire additional staff ASAP or lease or buy extra work premises? Can you cope with managing two separate business locations if you can’t be on the ground in each all the time? What tech tools do you need to invest in? How much will it cost you to get the systems you need in place in the new location? What about shipping and other inventory considerations? Could there be logistics concerns with getting products from one location to another?
You may need to put money into comprehensive cold chain technologies, for instance, to keep goods at an ideal temperature, or you may need to spend a lot of money on getting items shipped via courier or other quick methods to minimize business disruptions or customer wait times.
We tend to get excited about the potential rewards that can come from potential expansion opportunities but then ignore many of the risks that can also come with this growth. A scalable business model is one in which we can add considerably more clientele to our books without having to invest so many resources in servicing these people that the expansion sales aren’t profitable. It’s vital to run your numbers and figure out what’s possible before you get too invested in the expansion route.
Research the Best States to Expand Into
The next step is determining which state(s) is best to expand into. Don’t rush this decision, as it can come back to bite you later if you make the wrong choice. In particular, research to ensure there will be enough consumer demand in the proposed new area to make the expansion there worthwhile. Keep in mind that because your wares are popular in your current state, this doesn’t mean it’s a given that they will also be running out the doors in a new location.
Before you commit to one state, spend time doing some testing. You might, for instance, sell some of your wares at some markets or try out a pop-up store in a well-regarded shopping center. You could also travel to the states on your shortlist to participate in relevant tradeshows or conferences, or simply spend time, if you run a service-based business, seeing how easy it is to sign up new customers. Or, you might create an advertising campaign specifically for the proposed new area and run it for a few weeks to get an indication of interest.
Another vital step is to look into how much competition you’ll be against in the other states you’re considering entering. Determine how competitors currently market and sell to consumers there and if the clientele size is expanding or contracting. Check the fees competitors charge and what kind of customer service they provide, among other things.
Plus, learn how expensive leasing or buying premises will be and if you’ll have decent access to the services you require to run your business, such as access to transport links, distributors, suppliers, consultants, and more. Check legal requirements and other relevant rules and regulations in the states on your shortlist, too.
All this information will help you avoid setting up shop in a new spot that won’t give you the results you require to justify the amount you invest in the expansion.
Determine the Best Expansion Model
To effectively expand your venture interstate, select the best expansion model for your needs. This will depend a lot on various factors such as your goals, business type, budget, customer type, the complexity of the market, and so on. Consider if you want to use licensed contractors, set up a franchising model, or pay to set up your own additional stores or offices, etc., in each new area. It pays to have discussions with your accountant and financial advisor about the best way to move forward, structure-wise, too.
Expanding into a new market can pay dividends, whether in the next state over or on the other side of the country. However, there are many potential risks and downsides, so you must do plenty of research and strategizing to improve your chances of success.
Ingrid Maldine is a business writer, editor and management consultant with extensive experience writing and consulting for both start-ups and long established companies. She has ten years management and leadership experience gained at BSkyB in London and Viva Travel Guides in Quito, Ecuador, giving her a depth of insight into innovation in international business. With an MBA from the University of Hull and many years of experience running her own business consultancy, Ingrid’s background allows her to connect with a diverse range of clients, including cutting edge technology and web-based start-ups but also multinationals in need of assistance. Ingrid has played a defining role in shaping organizational strategy for a wide range of different organizations, including for-profit, NGOs and charities. Ingrid has also served on the Board of Directors for the South American Explorers Club in Quito, Ecuador.
