By Mike Handelsman, Group General Manager, BizBuySell.com and Bizquest.com
Growing a business is a constant challenge, and today’s economic climate is likely making things more challenging. However, by helping clients to explore expansion options uniquely available during an economic downturn, they may be able to take their business, and business performance, to new heights.
Here are a few fresh ideas, uniquely suited to current market conditions, which might stimulate some new thinking on how to expand a business.
Organic growth is the most common form of small business expansion, and may be the way your client has grown their business in the past.
In today’s economy where consumers are increasingly turning to value over business loyalty, successful organic growth requires introspection. Businesses must examine their relationship with key customers to pinpoint why those customers are, or are not, happy with service levels. Today’s economy may change how consumers perceive a product or service, as their needs regarding price, service levels, and other business factors may be influenced by their economic situation. Transforming this analysis into actionable business improvement initiatives involves hard work and forward-thinking business strategies. It’s about keeping customers happy, investing in the business, and selling and marketing aggressively.
Strengthening relationships with key customers and enhancing the value of the business’s products or services is imperative if a business wants to grow organically.
If a business has been based in a single location or region, now may be the time to set up shop in a second location or to expand the service area. This could involve opening a business in a nearby neighborhood or city, or making services available to a broader geographic audience.
Creating a second location is much less expensive than starting a business from scratch, yet it exposes a business owner to many new customers. As such, it can be a way to transform existing operations into a much more profitable business. Expansion often enables owners to benefit from economies of scale that were previously unavailable, providing additional profit enhancement.
It is likely that some of your client’s competitors are struggling in this down economy, to the point where they are ready to pursue an exit opportunity. Rather than have them sell to a new competitor, you may be better off acquiring them and folding their operations into yours.
Knowing the ins and outs of a particular industry, as well as the business, they will be less likely to overpay for it. Your client may also have good ideas on how to improve the competitor’s operations, through leveraging their expertise and experience. In addition, there may be economies of scale that can allow them to lower their raw materials costs or other business expenses.
Expanding Into a Related Market
Coach your client to take their strengths of their business and apply them to a related field. For example, a landscaping service might expand their operations to include a nursery business. There are some natural synergies between the two businesses, with each business potentially helping the other business to do well.
When expanding into related markets, they can start the second business from scratch or acquire an existing business. Acquisitions tend to be faster, less expensive and less risky, but there is something to be said for starting a new business with a clean slate.
Expanding in a related market with complementary products or services will increase potential customer base, and can likewise revitalize the sales cycle. The larger, more diverse customer base will also put a business in a more desirable position when they’re looking to sell.
Getting Started With Business Expansion
Imagination and planning are the keys to starting a business expansion initiative and where you can help your client brainstorm.
Contemplate each of the expansion methods discussed above and think through whether they are appropriate for the business you’re working with.
Turn that contemplation into a list of possibilities. Once you’ve identified some possible ways to expand, do a little market research to learn more about the expansion opportunity.
For example, in fleshing out geographic expansion, you might suggest that a client travel to the other city and ask potential customers whether they’d be interested in doing business with them if you opened up in their neighborhood. Or, scope out the market for additional competitors that could make your expansion more, or less profitable.
If they are contemplating the acquisition of a competitor or acquiring a complementary business, direct them to business-for-sale listing sites like BizBuySell.com or BizQuest.com to see what’s for sale.
In this market, it’s important for small business owners to keep eyes and ears open for potential deals that may come down the road. The key is for owners not to rest on their laurels. What they’ve accomplished to date may be impressive, but with a good expansion strategy in place, rest assured that the best is yet to come for them!
BizBuySell is the Internet’s largest and most heavily trafficked business for sale marketplace, with more business for sale listings, more unique users, and more search activity than any other service. BizBuySell also has one of the largest databases of sale comparables for recently sold businesses and one of the industry’s leading franchise directories