As a small business owner, you may eventually contemplate expanding your business into a new territory. But how do you know if business expansion is the right move for your business at this time? To help steer you in the right direction, here are five questions to consider before making this decision.
Can My Business Meet Customer Needs?
If demand for your product or service is high and you can no longer meet the needs of customers on the outskirts of your current region, business expansion may open key opportunities. You may want to expand your business to help reach your maximum sales potential. Depending on your business goals, you may also want to diversify your offerings to reach a specific target market in a new area.
Have I Conducted Market Research?
Market research will help indicate if there is a demand for your current offerings in a new location. Your research may also determine that diversified or new offerings are necessary to attract customers in different locations. Proper research will help you understand potential barriers to entry, competitors' strengths and potential opportunities in the new market.
Do I Have Access to Adequate Finances?
If your market research shows that your offerings are viable in a new territory, you will need to determine if you have adequate finances to cover the additional capital necessary to expand your business. You can gain access to capital via bank loans or private investors, or by applying for financing from the U.S. Small Business Administration (SBA), which offers a variety of loan programs for small businesses that need assistance.
Will My Current Technology Support Business Expansion?
Expansion typically requires additional information technology infrastructure to support growth, so you'll need to evaluate your current infrastructure against the needs of a new location to detect potential gaps. Additionally, consider whether competitors have technological strengths that you will have to match, or weaknesses that signal a potential opportunity to fill a market need and gain a competitive advantage.
Will My Current Business Processes Support Business Expansion?
Chances are you will have to make changes to your business processes to support growth in a new territory, such as adjustments to product invoicing, ordering and delivering. Therefore, you will need to look at all aspects of your current and future business operations to determine which resources to redirect or add. You can begin by using process mapping to illustrate your core processes and highlight any changes to existing processes — such as sales and marketing, management and product development — that will be necessary to support the new business.
By answering these five questions, you can position yourself to better determine if business expansion is right for your small business.
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