When a business has established itself in its current market and is doing well, it’s often seen as a good time to expand into new territories.
As a business owner, you will understand the existing market, your current customer base and how to meet their needs – so, selling to a completely new market can be a daunting prospect.
However, if your company has good sales and a strong brand presence – it could be the perfect time to do it!
As with any change to your businesses structure, there will be risks. With a new market comes new competitors and that dreaded fear of the unknown. So make sure you take these 5 things into consideration before taking the plunge:
1. Your current market
It may sound painfully obvious but in order expand into a new market you need to identify exactly who you are selling to in your existing business.
Business owners are often overly optimistic based on the successes of their past endeavours and hope to capture the largest share of the new market.
What they don’t realise is that targeting a smaller area of an uncharted territory, based on who was attracted to the original business will make it easier to operate effectively and draw in new customers.
2. Market analysis
Expanding into a new market requires a great deal of research and you have to understand your customers in order to target them.
A well-planned approach will minimize risks and reduce pitfalls. You will also want to gain an understanding of the new markets growth rates, potential demand, barriers to entry and the new competitors.
To set your price, you will need to find a happy medium between affordability for your audience and feasibility for your business. You will need to look at the pre-existing price strategies of your competitors and assess where your position will be between them.
3. Entry points
Once you have identified the sector of the market you want to occupy, you will need to establish your points of entry.
A point of entry is where the potential customer becomes responsive to your product. This can depend solely on the product - for example, most people won’t care about hearing aids until they need one.
Some points of entry have a clear entry and exit point (for example baby products) whereas others are more fluid.
To minimize your initial costs and maximize your potential revenue, it is worthwhile studying these points of entry and weighing up the pros and cons.
Is there a clear point of entry for the potential purchasers? If so how can you get their attention as soon as they enter it, enabling you to beat the competition?
Your final decisions should take into account the potential to grow inside the new market and allow for further expansion.
Each entry point should be assessed by answering questions like:
Is there a need that can be fulfilled by your businesses presence? Will it appeal to the mass market or a particular demographic?
Who are the existing competitors? and can you gain the upper hand with your knowledge of the market and your resources?
Will you be expanding to a new region or a new country altogether?
‘Less than 25 percent of U.S. business ventures abroad are successful’ according to Entrepreneur.com. Founder of Etiquette International, Hilka Klinkenberg claims that this is because ‘Americans don't do their homework because they think the rest of the world should do business the way they do businesses’.
Any business owner considering foreign expansion should always do a compatibility check, considering issues such as exchange rates, distance and cultural differences.
The more similarities with the areas / countries that you are currently operating in, the smoother the expansion process is likely to be.
5. Is it right for you?
When considering expansion, whether it be local or abroad, it is always recommended that you look at your original business plan. Have you met the goals that you set out to achieve and made the most out of your current market?
If the answer is ‘no’ then you may want to reconsider your move.
In the midst of planning it can be easy to overlook personal considerations. Make sure that you evaluate your reasons for expansion and the potential impact it could have on your personal / family life before going ahead with it.
Expanding into a new market can be an effective way to leverage your business for growth, however, you need to make sure that you are being realistic. Think about what you can achieve and what you and your company can handle before embarking on your new business venture.
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