entering a new market
As a business owner, you have the most complete view of your business’s strengths, weaknesses, and potential. With so many moving pieces, it can be challenging to know when and how to grow your business by entering a new market.
Is it time to grow your business?
A few key metrics can help you identify when it’s time to expand. First, analyze revenue and demand. If you are struggling to meet demand, that’s a sign you may be ready to grow.1 Look for sustained demand and consistent revenue growth. Look beyond singular good months or busy seasons and identify patterns of growth. Customer retention trends can indicate if your loyal customers will remain with your business as it grows. Repeat customers spend 33% more than first time customers, so you will need that loyal customer base to grow along with you.1 Analyze your current cash flow and savings to make sure you have a safety net as you grow. This information will also be helpful if you plan to apply for financing to support expansion.
How should you expand?
Starting with overall market trends, identify potential avenues for growth. Market expansion strategies can include entering a new geographic areas, targeting a new audience segment, or releasing a new product for your current market. On a larger scale, a merger or acquisition of franchises or competitors can help you absorb market share.2 Research your competitors and make sure the new market isn’t oversaturated.
Gather research and customer survey data to assess your current market compared to the new market. Consider demand, market size, economic indicators, and pricing.3 Each of these factors will affect your growth strategy.
Work with your internal team and external partners to clearly understand your financial position and identify any threats or risks in the next 12-24 months. Then, build a scaled strategy to test viability before a full launch in the new market.4 This could look like a small pilot group, a targeted marketing campaign, or a soft launch to an adjacent audience segment. Before moving forward with the full market entry plan, evaluate the data from the viability test and determine if there is a strong business case for expansion.4
How do I maintain stability during times of growth?
Intentionally expanding your business can be risky. You’re moving from a position with strong cash flow and high demand to a more uncertain new space. Understand your metrics for success in your new market and stay abreast of any shifts or changes in your business’s current market(s). Just like you do in your primary space, monitor trends, economic factors, and the news to stay up to date on key shifts in your new market.
Entering a new market as a small business is a worthwhile growth strategy if your business is ready. From new geographic areas to product expansions and new audience segments, new markets can bring revenue and help you capture market share from your competitors. As you make plans for the coming year, work with your banking team to consider if your business is poised for expansion and build strategies for financial stability. If you know market expansion is a longer-term goal, we can help. An experienced business specialist can help you lay the groundwork now for future growth.
