Expanding into new markets is an exciting part of entrepreneurship. But expansion isn’t something that entrepreneurs should take lightly. It can be risky and if not done carefully can negatively affect an organization’s current operations.
Before expanding into new markets, entrepreneurs should ask themselves these questions:
1. Who will manage the additional branch?
Think about how the new operations will be managed. Will someone relocate? Or should a local managing director be hired instead? Expanding to a new market requires feet on the ground, so figure out whose feet it will be before venturing ahead.
Consider the pros and cons of relocating someone versus hiring a local. Someone who is promoted internally will know the business better, but a local hire may know the market well.
2. Will the current operation survive the stress?
Only expand into new markets if the current operation can withstand the stress. An expansion takes time and focus and can negatively affect the organization as a whole if it's not performed carefully.
Consider what an expansion would entail and how it could affect current operations. Can the organization handle leaders' traveling and focusing on a new market? Will the product-development team be able to focus, say, 80 percent of its resources to support that new market? Be sure the current business is up for the challenge and can withstand the stress of expansion.
3. Is there financing?
Entrepreneurs without sufficient capital will have trouble getting a new operation off the ground. Insufficient finances could hurt existing operations because funds would have to be reallocated from other areas. Raise enough capital to support the requirements of a new operation.
Additionally, establish a plan for financing once the new office opens. Ideally the new operation would be self-sufficient.
4. Will the business model or strategy work?
Research the market in depth. There’s no way to guarantee a business model or strategy will work, but proper research can help avoid some pitfalls.
Start by clearly defining the market, examining who the audiences are and identifying the competition. Think about location, as well. Are there any location-specific details that might affect the project's fortunes?
Be ready with one or two alternatives and be willing to pivot quickly if the results aren't promising. Don’t assume a business strategy that worked in an existing market will work the same way in a new one.
5. Who will help?
Expanding the business will require support from outside partners, as well. Entrepreneurs must consider the contacts they can turn to for advice, insights and opinions during the expansion.
Communicate with trusted contacts about the new venture and begin to build a strong support system.
Vendors can also help an expanding business break into new markets. Think about the services the new venture will require and who will provide them. What additional resources will be needed?
And prepare for plenty of surprises, from financial to legal ones, some pleasant, others discouraging. Yet lessons learned the hard way can inform an operation striving for success.
Think ahead about all possible scenarios and have contingency plans. Keep an open mind and be ready to adapt to any situation that might arise.
What other questions should entrepreneurs ask before expanding into new markets?