All successful businesses or startups ultimately face the challenge of whether they should expand their business or not. Business expansion can bring many benefits to business owners. From increasing market share and customer base to decreasing costs and improving operations, the benefits of expansion are abundant.
However, it is also fraught with perils and, if not managed properly, business expansion can spell doom for a struggling business. It can be a scary process, especially when you are not equipped with the right tools to make your business goals a reality.
As such, it is important for a business owner to know what business expansion is and how they can go about it in order to maximize their chances of succeeding.
In this article, we discuss some of the best business growth strategies and explore how expansion can benefit your business.
What Is Business Expansion?
Business expansion typically occurs when a company has reached a point of growth and is actively seeking out additional opportunities to generate greater profits.
Business expansion takes on different forms. It includes purchasing new assets, opening new units, adding sales personnel, increasing advertising, adding franchises, entering new markets, providing new products or services, and more.
There are a number of reasons why small businesses face the problem of expanding their operations. One of the most common reasons cited by experts is the lack of resources. The presence of too few employees in a given company can be quite a deterrent to expansion efforts as they would have to spend a lot of time training new people who may not necessarily have the same skill set or expertise as those who’ve been working for the company for a while.
Another factor cited by business owners is the slowing down of sales due to economic factors.
Entrepreneurs need to be aware of business-related market trends. In fact, a large segment of new small businesses are started by entrepreneurs who do not have a clear idea of what is trending and what is not.
In order to expand their ventures, many of these entrepreneurs must conduct research on what is currently selling well in the market. This research is especially crucial if the business relies on traditional marketing like direct mail or television ads.
Before any entrepreneur can embark on an expansion program, they must first formulate a sound business expansion plan. Most entrepreneurs fail to expand their ventures owing to the absence of a sound business expansion plan. Without a well-defined business expansion plan, a business owner may end up doing more harm than good to their company.
The process of expanding a business involves careful planning, business analysis, and the use of financial resources. To expand a business, it would be best to first develop a well-defined vision, mission, and business plan. It is important for entrepreneurs to determine what type of expansion they want to carry out. Once these are determined, they can then proceed to develop a suitable business expansion plan.
After developing a business expansion plan, entrepreneurs must determine what steps they will take to implement their new business plans. For example, they may engage the services of experienced professionals such as financial experts and operations planners. These individuals can provide them with detailed business plans and financial forecasts. Alternatively, they can also contact business mentors for advice regarding issues related to business planning and operations planning.
How Can Small Companies Benefit From A Business Expansion?
As the previous paragraph explains, business expansion is that stage when companies seek out solutions to reach more customers, increase brand awareness, and increase profits.
There are many benefits associated with the expansion of business, and it is something that small and medium businesses should think about when deciding to expand their operations, especially in other countries.
But before taking a look at the benefits, it is important for every entrepreneur to analyze the market conditions. The entrepreneur has to identify which markets are likely to show growth.
If the market conditions suggest that market competition will be on the rise, it is important to expand your business before others can grab the opportunity to take advantage of your expanding market.
Below you can see the main benefits associated with a business expansion:
1) Concentrate On New Product Development
One important reason why business expansion is positive for small businesses is that it allows them to concentrate on new product development. This is crucial for maintaining a competitive edge over competitors in the market. By expanding globally, small businesses can tap into new markets and offer new products to existing customers, while also reaching new customers.
In addition, expanding your business globally helps ensure that new products are accessible to as many consumers as possible. If done correctly, this can result in increased sales and profits for your company. Small businesses can begin developing new products at any time and introduce them to the public as soon as they are ready. This flexibility allows businesses to stay ahead of the curve and meet changing consumer demands.
Furthermore, expanding your range of products and services globally can enable you to maximize your profits. By diversifying your product offerings, you can tap into new revenue streams and mitigate risks associated with relying on a single product or market. This can help to strengthen your business and make it more resilient over the long term.
2) Increase Brand Awareness Internationally
Expanding abroad is an important step for many small businesses, as this can lead to increased and diversified brand awareness.
Expanding your business internationally allows you to tap into previously untouched consumer demographics— and you can use this to your advantage. By attracting consumers from other countries, you can use their markets to promote your products and services.
Furthermore, having a diversified brand awareness can prove to be a crucial strategy for small businesses, which often suffer from limited resources, less access to capital, and low profit margins. International business expansion, on the other hand, allows you to diversify markets in ways that may lead to increased profits.
Increased brand awareness is not only positive in terms of increased consumers, however. By taking your brand awareness to the next level, you may also gain new opportunities to partner up and cooperate with other businesses. Or, even better, you may gain new investors, helping you market your products or services in other countries.
3) Increased Economies of Scales
Economies of scale refer to the cost advantages that a business can gain as it increases its level of production or output. These advantages can come from a variety of sources, such as purchasing raw materials in bulk, spreading fixed costs over a larger volume of output, and taking advantage of specialization and division of labor.
For small businesses, expanding their operations can provide them with the opportunity to benefit from economies of scale. For example, as a small business grows, it may be able to negotiate better deals with suppliers because it is buying larger quantities of goods or services. Additionally, it may be able to reduce its per-unit production costs by investing in more efficient machinery or processes, or by spreading fixed costs (such as rent and salaries) over a larger volume of output.
By taking advantage of these cost savings, small businesses can improve their profit margins and become more competitive in their markets. They may be able to offer lower prices to customers or invest in marketing and advertising to grow their customer base. Ultimately, expanding their operations can be a positive step for small businesses that want to grow and succeed in the long term.
What Are The 6 Best Strategies For Business Expansion?
Below, we introduce the 6 best strategies that can help your business expand into the international market. Before jumping in, however, a word of advice.
It is important to acknowledge that business expansion strategies are not a one-size-fits-all kind of deal. They can change and develop along with your own company’s goals, objectives, and specific circumstances. These strategies can also vary depending on the type of expansion you are contemplating. If you are expanding into a new market, for example, the strategy you will employ will be different than if you were to simply expand your company’s presence to a new location. Ultimately, it is up to you to figure out which business expansion strategy will best meet your company’s needs.
With that in mind, here are the 6 best strategies we have identified for business expansion:
1) Market Penetration Strategy
Market penetration is a business strategy aimed at increasing the market share of a company’s products or services in a particular market. The objective is to increase the number of customers who use the company’s products or services, thereby increasing the overall revenue and profitability of the business. This strategy typically involves targeting a specific market segment and increasing the intensity of marketing efforts to reach potential customers who have not yet used the company’s products or services.
Examples of market penetration strategies include offering promotional discounts, increasing advertising spend, expanding distribution channels, improving product quality, or offering additional services to existing customers. By employing these strategies, businesses can effectively increase their visibility and appeal to potential customers, resulting in increased market share and revenue.
One of the main benefits of this approach is that it allows companies to leverage their preexisting products/services to increase sales instead of investing in product development. Furthermore, market penetration can also lead to increased market shares while reducing your competitors’ share.
This type of expansion is well suited for small businesses looking to establish themselves in a competitive market and companies with an already strong consumer base, as they offer a cost-effective way to expand their customer base and drive sales growth.
2) Marketing And Promotion
Another strategy to expand your business is to have a solid marketing and promotional strategy in place in order to maximize your market share. There is no one single formula for achieving success when it comes to marketing, and what works for one brand may not work the next. One strategy, however, is to empower your business through marketing and promotional strategies that create strong customer loyalty to your business.
Customer loyalty may be achieved through a variety of means. Running deals and promotions, having a rewards system, or fostering a strong social media presence are just a few ways you can capture customer loyalty.
By increasing your marketing and promotional efforts, you will create a strong brand image that allows you to establish yourself in your industry as a dominant force and become instantly recognizable to consumers.
3) Expansion Into A New Market
When a market becomes saturated with one type of product or service, that market may begin to dry up. You may have noticed the traditional business trend where businesses have expanded into areas where they were previously unable to do business as a result of market saturation. This is what we refer to as market expansion. Market expansion refers to the process of a business entering new markets or expanding its reach in existing markets. It typically involves expanding a business’ product or service offering as a means to promote growth.
Market expansion is typically ideal for those that have reached a plateau in their existing markets and are looking for new opportunities for growth. It is for those businesses that have successfully penetrated their existing markets and have a strong customer base and brand identity are often in a good position to explore new markets.
4) Expand Your Business Abroad
At some point, for businesses, the local market becomes saturated, and the only way to expand is to go abroad. This is a step that many companies are afraid of because it comes with challenges, but also many opportunities because you are able to sell your products or services to more users.
Expanding abroad may mean mixing up your business strategy or learning new things. For example, international business expansion may require you to think about hiring a remote workforce and the benefits of having one, and you may have to learn how to effectively manage a remote team.
In addition to this, international expansion means that you must now deal with HR and payroll in new countries, understand their labor regulations, and understand how to stay compliant. In this situation, a PEO may be the best solution for your business, as it allows you to outsource HR and payroll abroad without the risk of breaking local laws and regulations when hiring and managing employees abroad.
5) Start A Franchise
Expanding a business through franchising can be an effective way to grow and increase revenue. When a business decides to franchise, it allows others to open and operate their own location of the business under the same brand name, operating system, and guidelines as the original business.
Starting a franchise offers several benefits to businesses. Firstly, it allows for rapid expansion into new markets with lower financial risk for the franchisor. The franchisee is responsible for financing the opening of the new location, which can reduce the burden on the franchisor’s financial resources. Secondly, it can increase brand awareness and recognition as the franchisee invests in marketing and promoting the business in their local market. This can ultimately drive more customers to the original business and the other franchise locations.
Additionally, franchising provides a controlled environment in which the franchisor can maintain consistent branding and operational standards across all locations. This helps to ensure a positive customer experience and build customer loyalty. Franchisees are also given training and support from the franchisor, which can increase the likelihood of their success and ultimately contribute to the success of the entire franchise system.
6) Enter A Joint Venture Or Acquisition Agreement
Entering into a joint venture or acquisition agreement with another business can be a powerful strategy for business expansion. A joint venture involves two or more businesses coming together to collaborate on a specific project or business venture, while an acquisition involves one business acquiring another business.
By entering into a joint venture or acquisition agreement with a larger, more established business, you can gain access to their resources, including technology, expertise, and customer base. This can help to reduce the time and cost required to expand your business into new markets or to develop new products or services.
In a joint venture, both businesses bring their unique strengths to the partnership, which can create a synergy that benefits both parties. For example, a small tech startup might partner with a larger corporation to develop a new software product, combining the startup’s technical expertise with the corporation’s resources and market reach.
In an acquisition, the acquiring business gains ownership of the acquired business and its assets. This can be a more straightforward way to expand into new markets or industries quickly, by leveraging the acquired business’s existing customer base, brand reputation, and expertise.
Your business’s success depends on understanding and leveraging the best strategies for business expansion. Regardless of the business expansion strategy you choose, remember that it is important to remain competitive.
By investing in new technology, processing data more efficiently, and using other tools such as social media, your company will remain at the forefront of its industry.
If you stick to a proven business expansion strategy, such as those outlined above, your company can continue to grow and prosper for years to come.If you need help to hire employees abroad or manage payroll, contact us and we will be happy to help!