HomeNewsWhen IS the right time to expand your business?
When IS the right time to expand your business?
Over the years at The Business Village, we’ve seen a lot of businesses grow from initial start-ups to being fully fledged, successful companies. The process from seedling to mighty oak is individual and complex. It varies from business to business and from one entrepreneur to another. Quite often a small business will reach that dreaded stage where the owner wants to grow, but is stymied by either a lack of capacity, or insufficient resources/investment to fund it. Taking the plunge and moving towards the next step in your business’ journey can feel daunting. So, when IS the right time to expand?
When you first launched your business, you made a plan. It’s an essential element in the start-up phase. It’s also a vital component in the expansion phase. Having a clear strategy will help you to set goals, targets and a timescale in which to achieve them. The first thing to decide, so you can set out your strategy properly, is HOW you plan to grow.
There are several ways in which you can develop your business and a number of key things it’s important for you to do first.
Do your research
A very good way to discover the best way to proceed is to begin by carrying out market research. Start by investigating the target areas you think might be viable for your business. Discover who your ideal customer is, create their profile and make the most of this information when creating your marketing plan for growth.
Consider which markets will be the most appropriate for your business. Make a list and prioritise, listing them from which you think will be the easiest to break into, to those that will be most difficult. Also consider the potential return alongside the difficulty rating you’ve given each market. Prioritise accordingly, so you know how to set out your strategy.
It’s important to research and profile your competitors, so you know how to make your business stand out. It’s a case of making sure your message is loud and clear; “we do what they do, but we do it better!” Find out about your competitors’ brand message, how they do business, what they charge and how they advertise. This will be valuable information when you are positioning your company in the marketplace.
The research you compile from market research will help you to decide the best way and direction in which to develop.
Expanding within your existing customer base
Before you set off on a journey of discovery into unknown lands, there is an obvious and easy path to try first. Your existing customer base is always the place to begin. This is your home market; people who already have a relationship with you and your business. You’ve invested time and energy into converting these people from prospects to buyers. You’ve built trust and a reputation for good service. So how can you expand your business within your current market?
Re-engaging with dormant leads: If you have customers who haven’t purchased from you for a while, get in touch; let them know you’ve noticed their absence and give them a good incentive to return and buy from you again.
Engaging with existing customers: Give customers a call or drop them a friendly email to say “Hi” and ask how they’re doing. Let them know how much you appreciate their business. Then drop in an incentive; a special offer or discount.
“Do you want fries with that?” Upselling is a good way to let your customers know that you understand their needs, as well as encouraging them to increase their spend with you. If you have an additional product or service that complements their purchase, offer it. Tell them why it’s a good add-on for them.
Business Referrals
A referral is a great way to find new customers. People like to buy from a business that comes with a recommendation from someone they know and trust. Encourage referrals from your existing customers by offering incentives, such as a discount for them and the person they refer; maybe increasing the discount if they refer more than one new converted customer.
Expanding into new markets
New market development can take several forms. Deciding which is the right direction for you will require some groundwork and each will require a specific approach.
New Market Development
This involves taking your existing line of products or services and selling them into new market areas. This could be identifying a new sector or industry that would find what you do to be useful. Maybe you discovered that one of your existing customers works in an industry sector that you hadn’t previously considered? This opens up a great opportunity, as you can target quite specifically, clearly setting out the features and benefits for your new marketplace.
Alternatively, you may be looking at geographical expansion. Either widening your current sales area within the domestic market and/or expanding into export markets. There are a number of key things to consider here. Domestically it’s reasonably straightforward, requiring a good marketing plan and putting the work in to bring it to fruition. If you’re thinking about exporting for the first time, it’s a good idea to get some expert advice. The UK Government has some important and useful information on their website.
Online Market Development
If you already have a standard information website with an effective sales funnel that leads visitors nicely along the road to conversion city, you’re halfway there. Consider launching an e-commerce section, where people can buy direct.
If you already have an online shopping function to your site, consider additional ways you can market it. Look at how you can increase your online footprint and reach even more potential customers. Ensure you are utilising social and business networks effectively to get your message across. Audit your website and ensure your SEO is ticking all of the boxes to give yourself an even better chance of success.
Diversifying and improving your offer
Increasing your product line can be an effective way to grow your business. This is especially productive if you have reached saturation point for your current range. Adding more lines and add-on services can be a great way to expand and grow your business and customer base. You’ll be selling to existing customers whilst attracting new ones; growing in two market bases at the same time. The marketing strategy may be different for each group, so it’s important to think carefully about how you will target and introduce your new products.
Collaboration, Acquisition and Franchising
Buying or merging with an established business and incorporating it into, or combining it with, your existing brand can appear to be a quick and easy way to expand. There are many advantages to going down this route. There is a lot of due diligence to be completed though before you take the plunge. It’s vital to do your homework, get specialist legal advice and ensure everything is done by the book.
Franchising can be another good way of achieving growth. When you incorporate your existing business into a well-known brand, there can be many advantages. Depending on the business sector and awareness of the franchise of course, you can gain an immediate customer base and an established support function and framework to move into. Again, expert advice and specialist legal help is advised, before you take the plunge.
Alternatively, if your business model is successful and can be replicated, franchising your own business and having additional branches open up can be a very lucrative way of building and expanding your operations. The British Franchise Association has some useful information on this topic.
Collaborating with other businesses that complement your own can provide a boost to your bottom line. Working together, maximising the reach of both companies can increase market penetration and be mutually beneficial. Of course, formalising the process is advised along with ensuring legal protection is in place for all parties, in case of any liabilities that may occur.
Funding
You may be asking, “Can I afford to expand my business?” You could have reached a peak in terms of how far you can take your business using its current resources. There might be huge potential for your company to grow and become a serious presence and an economic success story. So, perhaps the question you should be asking is, “Can I afford NOT to expand my business?”
If you’ve reached a plateau, there’s always the risk of a competitor overtaking you and casting their shadow over what you do – even if you were in the market first. There may be more you can and want to do in terms of your own ambitions, or what you want your business to achieve. So, how can you make it happen?
Risk is something you must consider when thinking about funding. There are several routes to increasing investment in business, each with its own advantages and disadvantages. Again, do your research, speak with experts and find the option that best suits what it is you’re trying to achieve.
There are also specialist business funding organisations, but as with anything financial in nature, do read the small print. Often a lender will require a personal guarantee for any borrowing, which removes any protection for business owners covered under UK legislation.
Borrowing
You may be happy to take the risk on by yourself and borrow the money you need by yourself. Your business banking provider may be able to help but do remember that they are not independent and will only be able to advise you in relation to their own financial products.
If a bank is the route you choose, create a robust business plan with financial history and forecasts. This must be backed up with evidence to demonstrate that what you predict is achievable. Banks with a strong business focus may be amenable to lending the money you need to fulfil your aims.
Third-party Investors
You may be fortunate enough to have the backing of a third party, who understands your business and has money to invest in your company. Strong and binding legal agreements are a non-negotiable requirement here; no matter how well you know the person who is investing.
Alternatively, you can approach an organisation that specialises in finding investors for companies that are looking for sources of funding. Our previous blog about Angels in Business Investment will give you some more information about how this process works.
If you’re brave enough, you may even want to apply to go on Dragons’ Den like our own Claire Gelder of Wool Couture. Claire’s success is something we are all very proud of here at The Business Village and is the perfect example of a business that began here, grew and moved on when it was well-established.
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