Starting a business is an exciting journey that gives you the opportunity to hire workers, serve customers, and strengthen your finances. While it’s a fun journey, it is also a challenging one. Getting your company off the ground takes a lot of work, but once you have a few years of experience, you may set more ambitious goals. Entrepreneurs frequently look at the next objective, and expanding your business can bring you closer to your goal. Achieving a higher growth rate than your competition can make more goals seem realistic and increase your market share in the process.
How Do You Know When It’s Time to Expand Your Business?
Expanding your business means more revenue. Since more revenue is a good thing, doesn’t that mean you should always want to expand your business? Not so fast. Some growth is unhealthy. An unprofitable business model will become worse if you let it grow. The losses will compound and put the company in a precarious position. A
Unprofitable businesses aren’t the only types of companies that would struggle from an expansion. Profitable businesses with limited resources to serve customers can also create new problems. If your staff feels overworked and customers have to wait a long time before receiving their product or service, it can demoralize workers and turn customers away. A restaurant that can seat 100 people shouldn’t try to get 1,000 people at the door every evening. Getting too many people results in longer wait times and stressed workers who may seek more manageable jobs at other companies.
Business owners should establish a profitable business model and fix critical issues before expanding. Improving the foundation makes scalability sustainable instead of turning it into an overwhelming nightmare.
Signs That You Should Expand Your Business
We have covered some reasons to avoid expanding your business. The limited capacity to serve customers and an unprofitable model present challenges. Instead of only looking for the bad, business owners should also look for the good. These are some signs that can indicate you are ready to expand your business.
Your Market is Growing
As a market grows, demand rises as more people become interested in the products or services within the industry. Stronger demand means more potential customers, which can make growth more attractive. Making additional investments in your business can help you reach new customers.
You Have More Business Than You Can Handle
As more people learn about your business, you may have more difficulty serving everyone with your current staff. When you and your team feel overworked from rising demand, it may be a good idea to hire additional people. Having more business than you can handle means it’s possible to get more, but only if you have systems and staff in place to address existing customers.
You Have Steady Cash Flow and Profits
Business expansion often requires capital, and it’s not guaranteed to work out. If you are barely covering rent and other expenses each month, you may want to get more defensive. However, if your business is doing well, you may want to invest in growth opportunities. Steady cash flow and profits give you more flexibility to pursue new initiatives and wait for them to pan out.
You Have a Strong Team
A business owner cannot serve every customer. Putting the entire business on your back limits your ability to serve others. Business owners hire workers to help with serving customers. As these workers become more experienced, a business owner can rely on them for important tasks. Reliable team members may also train new recruits to speed up the learning curve. A strong team gives you a good foundation to provide goods and services to existing customers while expanding your company.
There’s a Growing Demand for New Products and Services
Some industries move faster than others, and popular products may lose their relevance within a few years. However, creating new products and services keeps your business relevant and can create additional revenue streams.
How to Expand Your Business: 10 Keys to Success
Many business owners want to expand their businesses, but with limited time, resources, and tactics, which strategies make the most sense? These 10 keys to success can accelerate your path to gaining market share and reaching new customers.
1. Build a Sales Funnel
A sales funnel acts like a 24/7 salesperson. This funnel is a series of emails a prospect receives shortly after providing their name and email address on a form. Your in-person and online marketing efforts can lead people to a sales funnel that guides them on the customer journey. In this funnel, prospects can learn about your company, receive valuable content, and get a call to action. The call-to-action can encourage a prospect to buy your product, schedule an appointment, or book a reservation.
You only have to build a sales funnel once, and then it’s a matter of reviewing data and making adjustments. After that, you can do it yourself with software or hire someone for the project. Then, after someone completes your sales funnel, you can add them to your newsletter and continue sending emails about promotions, product releases, and other developments related to your company.
2. Make Use of Content Marketing and Social Media
The internet has changed how people interact with each other and shop for products and services. Search engines and online platforms make it easy for consumers to do hours of research before interacting with one of your representatives for the first time.
A content marketing strategy and social media presence can help you influence the conversation and position your company as an authority figure. Valuable content will make your brand more trustworthy, and optimizing for SEO makes your company more discoverable. Social media marketing performs the same function by improving trust and visibility. Companies with large teams may also want to consider hiring someone to manage their social media accounts and respond to customers’ questions.
3. Improve Customer Retention
Many businesses focus on getting new customers. They run ads and create new assets designed to increase awareness while ignoring customer retention. Customer retention puts the focus on existing customers who have already purchased a product or service from your company. These customers already know you provide value, especially if they are repeat customers. You don’t have to spend ad dollars telling these customers who you are. Retargeting campaigns create a reintroduction and ignite warm leads. You don’t have to rely on converting cold leads for your company’s future.
Business growth isn’t only a matter of reaching new people. Getting your current customers to return more often and increase their purchasing frequency can improve your company’s bottom line. The revenue you generate from existing customers can go into ad campaigns and other efforts that attract first-time customers to your business. Serving your existing audience can also introduce new opportunities, and their word of mouth may have a better impact than most marketing campaigns.
4. Introduce New Products and Services
New products and services give past customers a reason to revisit and buy from you again. Each new offering can increase the average lifetime value of a customer and bring new prospects to your company. Some prospects may not be interested in your previous products and services, but your latest offering may resonate with them. In addition, attracting prospects for your newer products and services may bring more attention to your previous launches.
Business owners should monitor the competition and see how frequently they release new products. For example, while Apple announces a new iPhone every year, entertainment companies release multiple movies each year. Business owners should adjust their release cycles based on consumer demand. If sales are still strong, it makes sense to continue the pace or ramp it up, depending on the amount of time and effort that goes into introducing new products and services. Conversely, declining sales may be a sign to slow down on new product releases or to pursue another strategy.
5. Take On New Markets/Opportunities
Your current market has opportunities, and it’s good to capitalize on what is available to you. However, some businesses exhaust their markets or face stiff competition. Embracing new markets and opportunities can help you embrace less crowded opportunities or give you a competitive edge. Tackling new markets and opportunities allows businesses to reach broader audiences and further diversify their offerings.
6. Acquire Existing Businesses
A common expression invites us to wonder why we should bother with reinventing the wheel when it already exists. Adding a new segment to your business takes time and will involve many mistakes. However, pursuing a new opportunity with in-house resources can make you a latecomer to the party.
Instead of using in-house resources, some companies acquire existing businesses instead. When you purchase another company, you get all of its assets and brand recognition. Amazon had been dabbling with grocery stores for a few years before acquiring Whole Foods for $13.7 billion in 2017. That purchase accelerated Amazon’s plans. The company didn’t have to find hundreds of commercial properties for their stores or do any of the setups. Amazon didn’t have to build a grocery brand and start from scratch.
Amazon purchased Whole Foods to save time. The acquisition cut years off the timeline and allowed Amazon to instantly have a chain of grocery stores. This approach is similar to how Facebook acquires other social networks to minimize competition and expand to new verticals. The company’s acquisitions of Instagram and WhatsApp helped the company become a conglomerate in the social media space.
You don’t have to be as big as Amazon or Facebook to acquire companies. Buying a local business, regional company or similar entity can grow your company. These acquisitions will be more affordable. With good synergies, the acquired business and parent business can help each other obtain new leads and sales.
7. Leverage Online/Global Platforms
Online platforms attract millions of visitors each day. Some of these platforms cater to a broad range of people, while others appeal to specific groups. These platforms can help you reach more people and generate social proof for your business. Some platforms like Yelp let you accumulate customer reviews to strengthen your online presence. You don’t have to be on every platform and should focus on the ones that your targeted audience uses. Business owners can analyze the competition and stay on top of trends to discover the best platforms to explore.
8. Consider Franchising
Some entrepreneurs are skilled at gaining market share and running businesses, but they don’t want to start from scratch. Franchising is a practical middle ground that lets the entrepreneur capitalize on an existing brand’s reputation and resources. The franchise will provide some training and help you get started.
9. Develop Strategic and Long-Term Partnerships
Every company can expand into new markets and reach new customers on its own. Many business owners can generate initial momentum on their own, but everyone soon hits a wall. Some business owners get through this hurdle by hiring more people, but partnerships are another useful option.
Partnerships can help you find the best talent, discover the best opportunities, and accelerate customer acquisition. You and another business can cross-promote each other’s products and services and introduce new customers to each other.
Some partnerships can last many years and drum up a steady stream of sales. Business owners can find partnerships in various ways, such as social media, in-person events, and online outreach. While network growth may seem slow in the beginning, it gets easier to find and form new partnerships as you get to know more people.
10. Increase Access to Capital
Businesses need capital to make investments in their teams, physical presence, advertising, and other areas. Some companies can use their cash flow to cover expenses, but other investments may require outside funds.
Many banks, credit unions, and online lenders pair business owners with additional capital. You can choose from several types of loans and find the one that aligns with your needs. A secured small business loan features lower interest rates but requires collateral. An unsecured business loan does not require collateral but may have a higher interest rate.
The selection broadens after you decide on a secured loan or an unsecured one. You can also select from lines of credit, term loans, and other financial products. Financial institutions look at your credit score, revenue, years of experience, and other factors when deciding how much you can borrow. Building your credit and discovering opportunities to increase your revenue will give you access to more capital. Business owners should consider how much they need to borrow and how much they can afford each month for loan payments.