Knowing how to expand a business is crucial to sustaining your business’s success and financial well-being. If you fail to grow and adapt your business, you risk being left behind as the market changes or having a competitor cannibalize your business.
However, it also means putting in additional work, possibly hiring more employees and maybe even getting funding to cover the increased cost. Before you take the leap, you want to be sure your business is ready to expand.
Indicators that it’s time to expand your business
To know when to expand a business, consider the following factors. If several are true of your business, it may be time to branch out:
You have a loyal customer base.
Customers are asking you to grow.
Your business has been profitable for three-plus years.
You have a strong team to support expansion.
Your industry or market is growing.
You have more business than you can handle.
You see a need for related products or services.
You’re running out of room — literally.
Strategies to expand your business
Once you’ve established that expansion is the right move for your business, consider these tips to take your operation to the next level.
Add new offerings
As a savvy business owner, you’re likely always evaluating the market and looking for opportunities to add new products or services to your mix. Start with market research and talk to your current customers about other offerings they would like to see from your business and what they’d be willing to pay for them.
Be careful not to pivot too far away from your core business. If you sell apparel, a natural expansion might be to start offering shoes or accessories. It would be a little more far-fetched if your new product was baked goods. The key here is to diversify your offerings so that they complement each other.
Optimize your existing market
Growing your business doesn’t always mean getting new customers — it can also mean selling more to your existing customers. To implement this strategy, segment your market to identify the customers that are most likely to buy from you. This analysis can divide up your customers based on the criteria you choose, such as age, location and buying history. Once you find the most profitable segment of your market, focus your sales and marketing efforts on that segment and expand your business with them in mind.
Claim a niche market
It may seem counterintuitive, but you can grow your business by narrowing down your market to a very specific type of customer. Your niche market is what you find when you take market optimization to its logical end. The niche market is a highly specific subset of the market on which your particular product or service is focused. A benefit of focusing on a niche market is that there is less competition and it takes fewer resources to reach them. With a niche market, you’ll typically experience higher brand loyalty and strong word-of-mouth growth.
Move into new markets
When you move into a new market, you are trying to sell your existing products or services to new customers. The new market could be customers in a different location from where your existing customers are or a different market segment within your existing location. This typically means opening up a new location or focusing your marketing efforts on a new customer segment.
One of the most effective ways to move into new markets is by seeking out customer referrals. A personal recommendation is one of the most effective forms of advertising, and referred customers typically convert more effectively than non-referred customers. The best way to drum up word-of-mouth marketing is to have a customer referral program — a systematic (and incentivized) way of getting current customers to refer others to your business.
Explore online sales channels
If you’re a brick-and-mortar merchant, making your products available for purchase online is a great way to extend your market reach. To start, you can create a business website using an e-commerce website builder, then focus your SEO and digital advertising efforts on attracting customers outside of your business’s physical location. Another option is to create a store within a major e-commerce marketplace like Amazon or eBay, which makes it easier for customers to discover your products or services. And don’t forget social platforms like Facebook, Instagram, TikTok and Pinterest to expand your digital footprint.
Partner with other businesses
Partnering strategically with other businesses can give you access to a whole new market. It can take time to identify the right opportunity, but ideally, you’ll find a partner whose products or services complement your own while not cannibalizing your business.
Acquire a new business
Buying an existing company is another way to expand your business. Look for a business that complements your own and is in solid financial condition. You should also have an idea of how purchasing the business will help strengthen your own operation: Will it give you access to new clients? Will it allow you to diversify your product offerings? Can your business afford it? These are questions you should answer before buying.
Consider franchising your business if you feel you can create a system that would allow others to easily replicate its success. Under a franchising model, you license out your business model and procedures to others who will sell your branded products or services. Note that this is an expensive and complex procedure, but can lead to very fast growth.
Research your competition
If you’re not sure what to do next when considering how to expand your business, see what your top competitors are up to. Did they recently launch a new product line or service? Have they opened any new locations? What about their small-business marketing strategy? Learning what your competition is up to can help you understand what your business can do next and inspire you to grow in new ways.
How much does it cost to expand a business?
The cost of expanding a business will depend largely on the type of business you have and the scope of your expansion plans. For example, it can be especially costly to expand your product offerings or acquire an existing business. On the other hand, starting an e-commerce store or expanding your existing market can be lower-cost strategies. Regardless of which approach you utilize, you may need outside financing to help cover the upfront costs. Some business expansion loans to consider include term loans, SBA loans and equipment financing. We recommend comparing your business loan options to find the best fit for your expansion needs.
A version of this article originally appeared on Fundera, a subsidiary of TBT.