Are you considering expanding your business regionally, nationally or even globally? Ask yourself these questions first.
By Rieva Lesonsky
Before you make the big decision to expand your business into new markets, take some time to assess whether your business is really ready for the move. Here are eight questions you should ask yourself when deciding if now is the time to grow.
- Is your business running smoothly? Your existing business should be stable and doing well financially before you take on the challenge of expansion. If your business is going through hiccups or sales are in decline, focus on fixing the existing problems before you even think about growing.
- Do you have the right processes and people in place? Expanding your business to new markets will take most of your time and attention. To keep your existing business humming along during that time, you’ll need to have proven operational systems and people who can manage your team.
- Are you receiving requests for your products from new markets? If people across the country or overseas are contacting you to ask about making a purchase, this is a good indicator there’s likely a demand for your product outside your current territory. (You’ll still need to do market research to confirm this; see step 7.)
- Do you have enough capital to finance your growth plans? You’ll need sufficient capital for the initial investment required until your expansion begins to turn a profit. A healthy cash flow is also essential, since you’ll have additional expenses during the expansion stage.
- Do you understand the rules? If you’re considering global expansion, it’s important to fully understand the regulations, payment issues, and laws involved in selling overseas. For example, shipping and customs costs can eat up a lot of your profit if you aren’t prepared for these expenses. You may also need to change your packaging or even your product to meet overseas standards.
- What relationships do you have that can help you expand? For example, do you have in-house expertise, or will you need to hire new employees? Do you have relationships with other businesses that can assist in distribution, sales and marketing of your product in the new market? If not, what partnerships could you form to help you?
- How big is the new market? Conduct the same type of market research you did when planning your startup. How big is the market for your product in the new region? Is it growing or shrinking? Who are your competitors in that market and what share of the market can you realistically hope to capture? gov is a great resource for conducting market research, identifying potential overseas markets, and learning more about doing business globally.
- What distribution channels will work best for your products and market? You may want to sell to resellers or retailers in the new market, sell directly to customers online, or sell through a network of salespeople. Each has its pros and cons, so consider which makes the most sense for you. For example, selling direct to customers online can be an affordable way to enter a new market without all the headaches of working with overseas resellers.
As you consider all of these elements, it will become clear whether expansion is a natural next step—or whether you need to wait a while. If the latter, use the time to streamline your business operations, improve your cash flow and learn all you can about the market you want to enter.
If you decide you’re ready to expand now, take the time to write a business plan for your expansion. Just as with starting a business, writing a business plan helps you think through all the steps to growth, foresee how you’ll handle any potential problems, and create a road map for success.
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