The prospect of expanding your business can be exciting. When your business has outgrown its current location or your customer base has spread geographically, you may want to expand your business to better keep up with market demands.
Expanding your business wisely can help you maximize your profits and foster brand recognition. Odis Jones, an executive with 25 years’ experience, explains why a company may want to expand and some important tips to keep in mind.
Why Expand Your Business?
1. Establishing New Markets
One of the primary reasons why companies expand is to establish new markets. This can enable your company to reach an all-new customer base. This is especially helpful when there is a tight competition in the existing market.
2. Increasing Volume
Another good reason to expand a business is to increase sales or service volume. For example, if your restaurant is continually so full that you have to turn away tables, you should consider expanding or building a new location. You can remodel your existing restaurant, build a new one, or open more locations.
3. Offering Additional Services
When you expand your business, you will be able to offer additional services to your customers. For example, a bookstore may want to add a coffee shop to keep people in the store longer and satisfy their needs without having to leave the business.
4. Enhancing Your Brand
Building a brand is another good reason to expand a business. Using franchising is a great way to expand on a successful retail or restaurant brand. You can sell the rights to your business and make sure that the franchisees follow your procedures. Franchising spreads your company’s reputation over a larger geographic area and increases the chances that your company will become a household name.
At the same time, you need to be careful about the choice of new franchisees or new locations. The reputation of your original business, as well as your reputation in general, will take a hit if this new location or franchise is not as high-quality as your first location. For example, a seafood restaurant may want to open a location away from the coast, but its fish will not be as fresh and it may not succeed.
5. Economies of Scale
Another good reason to expand a business is to take advantage of economies of scale. This means that your business will be more likely to receive preferential deals and discounts from your suppliers if you buy larger quantities. For retail and restaurant businesses, this is an especially worthy advantage.
6. Attracting a New Customer Base
One of the primary reasons why businesses expand is to reach new customers. When you expand your business, you will attract new visitors, especially if you offer new products and services. For example, the bookstore with the coffee shop inside may attract people who are primarily interested in coffee, and they may also sell more books along the way.
7. New Revenue Streams
Having an expanded business means that your company will have a greater base of money-making opportunities. A business that relies on one product or service alone is vulnerable to the fortunes of that one item. For example, opening a bar in an established restaurant will attract a different sort of customer and allow your revenue stream to spread out.
Tips for Success
These three tips can help you decide whether expansion is right for you and can guide you to the best possible plan.
1. Make Sure the Timing is Right
You may want to wait until the timing of your expansion is appropriate. Do your research on the market and make sure that you have a better idea about how you can enhance your business through expansion. For example, if local retail businesses have been in a slump, do not try to expand your business until the outlook is more positive.
2. Manage Diversification Wisely
Before you diversify your products or services, do market research and make sure they are actually needed by local consumers. Your community may be oversaturated with pizza restaurants, so you would not want to open one in close proximity.
3. Acquiring Another Business
It may be easier to buy another business than to come up with an entirely new location yourself. This is an especially good option in slower market times when businesses may be selling for affordably low prices.
Acquiring a new business and converting it to a location of your own may take some time and effort, but the ready-made customer base will be a big help in establishing profitability.
Smart Business Expansion
When you follow these guidelines and tips, you will have a better idea of what you need to do in order to expand your business. Businesses expand geographically, by diversifying, and by purchasing new locations. All of these strategies can be profitable if they are handled wisely. Odis Jones reminds business owners to do their research before putting any money into an expansion plan.