“The only way that we can live, is if we grow. The only way that we can grow is if we change. The only way that we can change is if we learn. The only way we can learn is if we are exposed. And the only way that we can become exposed is if we throw ourselves out into the open. Do it. Throw yourself.” – C. Joybell C., author
You’ve come to that crossroads in your business that requires you to “throw yourself”. You’ve realized that the business needs to take a new path of growth.
Developing an expansion strategy means deciding where, when and how your business will grow. It can be as risky as it is rewarding. Which is why you need to put some serious thought into how to take things to the next level. The direction your expansion strategy takes will depend on the size of your company, the resources available to you and the opportunities that exist in your target market.
Below are a few ideas for your expansion strategy:
1. Drive an increased number of sales and products in your existing markets.
For example, you could aim to double your sales target over the next two years. This is the most risk-free option to consider for your expansion strategy. It requires more capital and more output, but you’re moving a market you know with a product you’re familiar with. You’ll need to consider the costs involved and the ability of the market to absorb higher volumes of your product.
2. Open another location.
It could be a new store in a city in which you already have a presence, new branches in another African country, or developing an overseas presence. Opening a new location requires your expansion strategy to consider the market into which you are hoping to shift. How does it differ from your existing market? Are there different cultural expectations around your product? What are the supply chain challenges in the new area? If you are selling a tangible product, what are the logistics involved around getting the goods to the new location? Instead of relying on the models you’ve already devised, best practice dictates that you prepare a completely new business plan for your new location. This will force you to consider all aspects of starting up in a new area.
3. Offer your business as a franchise opportunity.
If your business model is simple and your product is easily transported and warehoused, your expansion strategy could centre around franchising. For example, Selfie Sticks South Africa started up in September this year. According to Justin Garner, one of the company’s founders, this pole-like gadget used for taking photos of yourself has become instantly popular. Within one week of advertising for franchising opportunities, they had had enquiries from over 15 countries, ranging from Argentina to Brazil and Nigeria. The product is light, easy to transport and does not “expire”. And the risk is largely held by the franchisee, who knows the markets into which the product will be sold.
4. Start an alliance.
Consider merging with another like company, or acquiring one that is strategically placed in your value chain. The recent Steinhoff-Pepkor deal is one example of a large-scale alliance being unfolded as part of a grand expansion strategy. Steinhoff, the Europe-based furniture chain, now owns almost all of food and shoe retail group Pepkor. The latter has gained access to European markets through the move, while the former will be able to leverage economies of scale like never before.
Small business consultant Frances McGuckin offers ideas for centering your expansion strategy around diversifying. You could:
- Sell complementary products or services
- Teach adult education or classes in your field of expertise
- Import and or export your product or others’
- Becoming a paid speaker or columnist
The key to this expansion strategy is to look for your own existing areas of expertise and creative ways to offer them. Many business owners find a certain level of fulfillment in expressing their prowess in this alternate arena. And, of course, there’s the added bonus of providing an additional income stream that can “fill seasonal voids” and “increase sales and profit margins,” says McGuckin.
Behind the ideas fuelling your expansion strategy should be a good sense of how the moves will be financed. In a sense, your finances will dictate the direction and scope of your expansion strategy.
If you need assistance in determining the financial portion of your business’s expansion strategy, The Finance Team can provide a solution. We have a network of highly experienced and qualified finance professionals. They can provide interim or part-time expertise to your company as you devise your expansion strategy.
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