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How to Expand My Small Business Into Other Cities?

Written by on May 07, 2018

You may have outgrown your location with the business you have built. Perhaps it’s time to consider expanding your horizons and letting people elsewhere enjoy the fruits of your labor.

Now expansion may be just as exciting as starting a new business, but it may be scary too. You have poured your blood sweat and tears into creating and operating the business that you have today, you don’t want to compromise this momentum with mistakes moving forward.

You have nothing to worry. We are here to discuss the proper steps and how to proceed with your business expansion.

Going forward, you will have to think hard about what it takes to expand into a new market. The road ahead is paved with both great opportunities and potential dangers.

Constant Supervision?

Your constant supervision may not let you focus on other things that matter too.

There are a variety of business – from brick-and-mortar locations to e-commerce websites, location specific apps, etc. Some are easier to scale and expand to other locations, other types may take a bit more consideration and perhaps some supervision.

When it comes to expansion, you may have to think about letting loose of your reigns just a bit. If you cannot find trustworthy individuals to run your new locations, you may be forced to overextend yourself.

You need to ask yourself if you will be able to provide the same quality service at the other location, if your operations expand. Without having reliable people to run other location(s), your quality may suffer.

You will put yourself in a compromising position of either having to constantly monitor operations at multiple locations, or try to find reliable individuals for help.

This is a very important thing to consider when contemplating business expansion. Really think about how much supervision you will have time for, and if you have the right people looking out for you.

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Analyze Current Finances

You cannot successfully expand your business if your finances are not in order. Before taking the plunge, you need to go over the financial health of your business with a fine tooth comb.

How is your current business performing, prior to going through with the expansion?

  • Are you profitable?
  • Do you have any outstanding debt? How much?.
  • Does the business have anything to gain from expansion?
  • What are your financial projections?

Market Research

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Of course, when trying to infiltrate a new area, you have to do some research. We have assessed the financial health of your business, and it seems like you might be ready to go. Now you need to consider where you’re expanding to.

Again, no matter what business you’re running – if it’s online based or a physical location – you need to research your new market before diving in.

Market research will let you be prepared for all new obstacles and opportunities waiting for you in your new area of expansion. Without doing this critical step, you’re wondering aimlessly in uncharted waters. You could be blindsided by stiff competition or regulations you were not aware of.

SWOT

A classic SWOT analysis can always come in handy. This is one of the cornerstones of any market research for a new or an expanding business.

When going through with your market research, take some time to create a SWOT analysis for your new market which you’re about to enter. It will give you a nice oversight of what you should be expecting before and after you begin your new operations.

If you are not familiar with what a SWOT analysis is, here is a short explanation –

S – Strengths: Strengths of your business. What can you bring to the market and what advantages you have over your competitors.

W – Weaknesses: What can you improve within your business/operations? What would your competitors see as weakness? What should you avoid?

O – Opportunities: Are there any opportunities you can take advantage of? Any trends you can jump on? Positive changes in government regulation that may be beneficial?

T – Threats: Obstacles that you’ll need to overcome. What are your competitors doing better? Small market segment? Cash flow problems?

So now we have familiarized you with the SWOT analysis. It’s crucial to get it done before immersing yourself in a new business environment.

5 Forces

Know your potential profitability in your new market after business expansion.
Know your potential profitability in your new market.

Now we have come to another type of analysis that should be done before opening a business or expansion.

Porter’s five forces framework allows you to better understand any competition you may face as well as customer and supplier power they may have over you.

This is a bit more comprehensive than the SWOT analysis I discussed before. Five forces will give you a run-down of the profitability factors of your new location.

Here are the five forces in question –

1. Competitive Rivalry

This is focused on looking deep into your competition. Who is your competition in the market? How many of them are there? How do they compare to you and your services or products?

Try to do as much competitor research as possible. For all you know, the market may be too saturated and could end up costing you more to expand than what you’ll get out of the expansion.

2. Supplier Power

Suppliers may be different depending on how and where you expand. In your current location, suppliers may be plentiful, the location you’re eyeing out for expansion may not have as many suppliers or not in close proximity.

Many variables when it comes to suppliers can increase your operational costs. Hunting down proper supplier can get costly; or the exact opposite can happen.

Perhaps you found an excellent location with great suppliers that can provide you with cheaper inputs than what you’re used to.

Just keep in mind though, the less suppliers you have access to, the better bargaining power they have over you.

3. Buyer Power

How much power do consumers have over you? Is the new area that you’re expanding into have a sizeable target demographic for your to reach out to?

Are there any switching costs for the consumer if they choose your competitor later down the road?

Consumers, when there are few, and with many alternatives available have a lot of power over you.

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4. Threats Of Substitution

Substitution can negatively impact everything you have worked for – in your current location or the one you’re expanding to.

Any substitute has the potential of replacing you in a blink of an eye. You need to be on a look out for anything that can be an easy replacement for your good or a service you offer.

5. Threats of New Entrants

Is it easy for you and anyone else to enter the market? Are there any regulations that new or expanding businesses must look out for? Do you offer anything proprietary that would be hard to replicate?

Remember, if it’s easy for you to expand and enter the market elsewhere, it can be easy for competitors as well.

Arranged Capital

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Costs associated with expanding operations can vary, depending on your business. You will need to have allocated some capital or have access to sufficient lending or investors to make this step happen.

Try not to have your old location prop up the new one. Consider the new establishment as a separate venture that should support itself.

Establish Goals For New Location

So you went through all these steps and managed to establish yourself in a new location. That’s great news. Now you need to create some goals and milestones for the new location to strive for.

As with many things in your life and your business, you will want to create some S.M.A.R.T goals for your expansion. It will help you move in the right direction and make the crucial decisions that will propel you to success.

Set your financial goals with these SMART goal-setting questions

Conclusion

You have a lot on your plate, if you want to turn this business expansion into a successful endeavor. As you can see there are a lot of variables to consider before committing to this task.

If you handle yourself well, and are diligent with your research, you will be well prepared for what’s looming for you in the future.

For expansion preparation and knowledge of your new market is everything.

I’ll leave you with this quote – “By failing to prepare, you’re preparing to fail” – Benjamin Franklin.

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