Most business owners dream of continuous growth for their companies. Some envision developing and introducing a new product line. Others imagine opening up more stores in different locations. Either way, the end goal is the same: expansion. What differs between companies are driving factors and the style of the change.
Those factors can include a growing customer base and changing target markets. They can also be gaps in the market that competitors aren’t able, or willing, to fill. Moving forward with expansion plans involves developing a strategy that converges on opportunity and viability.
Just because you can grow your business doesn’t always mean you should. Before you decide to put those plans into action, here are three things to consider.
1. Can You Offer Unique Value?
In business, a unique value proposition (UVP) refers to the benefits of a product, as told explicitly to the consumer. When deciding to grow or expand existing products and services, look for unfulfilled needs in the markets. Or consider whether it’s viable to take an existing service people use, and change the way they access it.
For instance, telehealth platform Nurx saw gaps in accessibility and affordability in our healthcare system. Patients needed more choice, control and freedom. So Nurx started by helping connect patients to providers for sexual health services like birth control and PrEP.
A need for other online services and prescriptions created opportunities for Nurx to expand into services like at–home STI testing. Similarly to online birth control, this product line offers patients more provider access and care. It also provides benefits like privacy and access to lab tests they might not get from a local doctor’s office.
Underserved communities, for example, may not have medical offices that meet all community members’ needs. Wait times for walk-in clinics and pharmacies can be too long for many patients. And there’s the possibility that these offices and local clinics are far from facilities that do lab work. These are obstacles to routine healthcare that online and at-home services can help patients overcome.
This is just one example of a unique value in action. A business needs to reasonably solve an existing problem. Or provide something people desire that they’re currently not getting.
2. Do You Have Enough Resources?
According to the Small Business Administration, owners’ often use personal savings and profit reinvestments to grow existing businesses. This is similar to what founders of startups do to get their companies off the ground.
Growth requires that you have a proportional amount of financial resources, and expansion still carries some degree of risk. There’s the chance you could lose some or all of those resources if the expansion doesn’t go as planned.
However, finances aren’t the only resource you’ll need. When making the decision to grow your business, take stock of internal expertise and manpower. Expansion plans often require outside skills. You may need to hire others.
You’ll also need to make sure you have the energy and time to reach out to others. For instance, maybe you aren’t familiar with the communities you’re hoping to work with. This will require additional research on your part. Potentially, you’ll need to gain the trust and cooperation of local officials and residents.
Walt Disney visited several locations before settling on Central Florida for his theme park. He researched weather patterns, met with local officials, and scoped out various available areas within Florida before deciding on Orlando. Disney also relied on the advice and expertise of several people on his executive team. His decision to expand involved some intuition and vision, but he was also practical about logistics.
Any expansion strategy has to account for your organization’s capabilities. It needs to be built on a combination of internal and external resources you can realistically acquire.
3. Should You Merge With Other Companies?
Growth strategies don’t always rely on building other divisions and product lines from scratch. Acquisitions and mergers are some of the key ways businesses expand. Using acquisitions and mergers as a growth strategy allows your company to gain resources quickly.
Often, the product, service, and customer base are already there for you. Your company also gains the knowledge, research, and human resources of an existing organization.
There may be other physical assets that are a part of such growth. This could include facilities, fleet vehicles, and other equipment. Wireless companies, for example, may gain network towers and infrastructure when taking over or merging with smaller carriers. However, all of these gains come with potential drawbacks.
A merger or acquisition can create anxiety and animosity among employees. They may not want to stick around to see how combining the two companies turns out. You may end up losing some of the expertise and talent you were counting on. The risk of employees jumping ship is higher if there’s a cultural gap. This is why it’s critical to research the culture of a company you’re interested in.
See whether there’s a good fit between your existing culture and theirs. If you decide to move forward with the plan, transparent communication and strong leadership will be essential. Your employees will also appreciate your dedication to transparency.
People know that acquisitions and mergers can lead to personnel changes. You can ease some of the anxiety by mapping out and explaining any changes that will take place.
Acquisitions and mergers save you from the headache of building from scratch. But they shouldn’t be taken on lightly. Remember to attend to customers’ and employees’ needs, and take an active role in addressing and forming their perceptions.
Your business has to change and grow to remain competitive. However, not all expansion ideas are right for your company. There may even be times when you’ll need to sit on possibilities and revisit them when more favorable conditions exist. Even with well-researched strategies, some expansions struggle to take hold, and others inevitably fail.
Yet, the risk of failure isn’t necessarily something that should hold you back. Every expansion comes with risk. Focus on key aspects of successful growth strategies: filling existing market gaps, and delivering unique value that competitors can’t duplicate. With the right resources and the right vision, you can take your business to the next level.