Growing your small business can be an integral part of your continued success. If you have gotten off the ground and leveraged a proven business model in a specific market, now might be the right time to consider geographic market expansion.
Indeed, there are various potential pathways to enter a new market. Smaller or newer businesses with success in one area often think they can apply the same strategy and tactics that delivered success in an initial location. While there will certainly be useful lessons learned, every market is different.
Here we take a look at what your small business can do to succeed as you look to expand into a new market.
Are you ready for market expansion?
Perhaps the most crucial question that you need to consider before expanding into a new territory is whether this is the right time for your business. It might appear that this kind of expansion could be a great way to maximize profits and take a winning idea to the next level. But things are not necessarily that simple.
The ideal time to grow into a new territory is if your business is already dominating in its original geographic location. Remember that where you set up is the place where you have the most existing knowledge and contacts. As such, it has been the place where you will find success most easily.
You can only consider yourself to be ready for this kind of expansion if your business plan has been a complete success and that you are expanding not in the hope that this will increase your products, but because expanding makes sense from every perspective. Remember that some of the world’s largest and most successful brands have failed when expanding into new territory in the past. For example, take a look at these successful American companies that completely failed when attempting to establish themselves abroad.
Indeed, even if you do feel certain that your company is ready to expand into new territory, there are still multiple questions to answer. According to international firm Poyry, the key questions that you need to ask yourself include: What’s the competitive landscape like? How will geopolitical forces shape the marketplace? And is acquisition better than organic growth?
Consider opening a specific company in that market
One possibility that many businesses consider is operating a new business that is officially located in the new territory. The other option is simply to operate in the new market as a branch of the larger business. Choosing the right option depends on the specific needs of your business.
In some cases, it can actually be hugely beneficial to start a new company in the new geographic market that you are entering. Take, for example, a fast-growing location like Gibraltar, which has increasingly become a target for expanding businesses.
According to Selwyn Figueras, Partner at Hassans Law Firm: “Gibraltar continues to offer many advantages for entrepreneurs chasing their dream as well as international companies looking to take advantage of the full range of solutions available in Gibraltar as modern financial services and gaming jurisdiction.”
The current corporation tax rate in Gibraltar is just 10% –– far lower than many other European countries. As such, you can easily see the possibilities for headquartering a company here if you are interested in European expansion. This is definitely something that you should look into to see if it could be the right move for you.
Understand your customers
When you are considering market expansion, a key step is to identify and understand your customers. Remember that different markets have their own demographics, as well as their specific preferences and quirks. Don’t expect that the audience for your product or service is going to be identical when you enter a new market.
Consider issues such as whether customers in your new market are going to be willing to pay as much for whatever it is that you provide. Some areas have different priorities and may have a lower budget for certain services than in other parts of the world.
Really try to get into their mindset and do as much customer research as possible to establish who they are and what they want. You need to know your customer better than the companies that already serve them if you want to take those customers away from the brands that they already know and trust.
Create a specific plan and stick to it
It is more vital than ever that you should have a specific business plan when you expand. Some companies make the mistake of thinking that they can expand into a new market and simply test the waters. Doing so is exactly how you will fail to gain a foothold and end up losing a significant amount of money.
Speak with experienced local professionals who have experience operating businesses like yours in this new territory. They will be best placed to help you develop a realistic business plan that can actually reap your rewards. Don’t fall into the trap of simply believing that you can operate exactly how you have in your original territory.
Carrying out market and competitor research is an absolutely vital step in this process too. You can’t operate effectively if you don’t fully understand the new market and the companies that you are going to be competing against.
Small businesses can definitely have success when expanding into a new market, but that doesn’t mean it will be easy. Focus your efforts around research and understanding and work with experienced local market professionals who understand the territory. Move ahead only when you have a sound growth strategy you believe in and look for opportunities that might not be immediately obvious.
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