There are signs indicating that many small businesses in the United States are well-positioned to grow. For instance, data from the Bureau of Labor Statistics shows that, between March 2021 and March 2022, small businesses created 4.9 million jobs, accounting for 70% of all new jobs. And Bank of America reports that 65% of small business owners expect to see revenue increase over the next year.
If you’re among the many small business owners experiencing growth, you have a few options, such as launching new products or services, opening a new location, or adding a new sales channel. Here are some key steps to consider as you determine the best way to expand your business.
Do your market research
Once you decide it’s time to expand, your first step should be to determine your market position and identify a few opportunities for your business. Things may have changed since the last time you defined your target audience and learned about market trends. Look into your customer data to learn about their demographics, loyalty and purchasing behavior, and feedback.
In addition, take time to look at your competitors’ strengths and weaknesses. Read trend reports from sites like Mintel, Factiva, and IBIS World. Understanding both your audience and social trends shaping their perspectives can help you better figure out the best path for expansion.
Weigh different expansion strategies
Many people think expansion requires opening a new storefront, but there are different ways to grow that may be a better fit for your business. The main four expansion strategies to pursue are market penetration, market development, product development, and diversification.
- Market penetration: This option involves increasing sales in your existing market through targeted marketing or product development.
- Market development: In this scenario, you would enter new markets (such as opening a new location or sales channel) with your existing products or services.
- Product development: This strategy involves developing new products or services to reach new or existing markets.
- Diversification: Lastly, you have the option to offer new products or services that complement your existing offerings.
Be prepared to adapt and adjust based on feedback and market dynamics – keep it fluid.
Hinton Magazine
You may also look into merging or acquiring another business or franchising your business to others. These options are common for mature enterprises that have already maximized other ways to expand.
[Read more: 5 Quantifiable Ways to Determine It's Time to Grow or Expand Your Business]
Anticipate and mitigate the risks
“Business expansion comes with inherent risks that need to be managed effectively in order to achieve success,” wrote Wrike, a project management platform. Identify these risks early to find ways to mitigate them and protect your business during this crucial time.
Consider the financial, operational, and regulatory obstacles that your business may face when you start expanding. For instance, does your cash flow support your expansion plan? Do you have the right staff in place to oversee your existing business while you focus on expansion? Answering these types of questions can help you figure out what financing, hiring, and relationships you need in place before you start.
[Read more: 3 Signs You're Ready to Expand Your Products and Services (And How to Get Started)]
Test and adapt as you go
Expanding your business can be a lot like starting a new venture; even the best-laid plans can sometimes fail. Experts recommend testing the waters before investing too much in your expansion strategy. “Be prepared to adapt and adjust based on feedback and market dynamics – keep it fluid,” wrote Hinton Magazine. “By testing different strategies, it allows you to identify not only what works best for your business, but it also enables you to refine your approach if need be.”
Collect feedback on your new product, location, or sales channel before you go all-in. For instance, that could mean opening a pop-up shop, launching a product exclusively for your loyalty program, or selling on social media before developing an e-commerce page. Look for opportunities to constantly check what’s working and adjust when necessary.
CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.
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