Small Business Pam Watson Korbel
|Pam Watson Korbel is an expert on small business and revenue growth. She personally managed exponential growth in two companies: a software firm that grew by 500% in four years and a health care firm that grew by 1800% in eight years. In addition, she has been advising fast growth companies as a coach and consultant since 1996.|
How To Enter a New Customer Market
With success comes opportunity to expand your business into new target markets. For example, an engineering firm might expand from serving commercial building owners by adding a new market of colleges and universities. Or a retail clothing boutique might expand by opening a store in a new neighborhood.
In both situations, the focus is to add a new group of customers. By serving more than one target market, small businesses benefit by not only increasing revenue but also diversifying its customer base to weather economic ups and downs.
Expansion of target markets involves a six-step plan, as elaborated here.
Step 1: Identify a need
Expansion starts with an idea and generally that arises because of customer requests. Using the examples above, a college may get a referral to the engineering firm from a commercial building owner. Or the boutique might notice through customer zip codes that clients are driving across town to visit their store.
Through experience talking to new prospects and staff analysis, the business will determine if it wants to go on to step 2.
Step 2: Research the need
Entering a new market can be expensive because of marketing materials needed, staff to be added and fixed asset requirements like equipment and furniture. Research helps mitigate the risks of expansion.
The best research involves talking directly to your prospective customers. Interviews can be done to find out more about the needs. Generally interviews of 7 to 15 people will yield significant information about the idea. After the interviews, some businesses move on to a focus group to gain more qualitative information or perhaps a survey for quantitative information.
Step 3: Put together a plan
With the information gathered in the research phase, an owner can now put together a plan that incorporates what it will cost to expand to the new market and how many new sales dollars can be generated. Depending on the scope, this may necessitate a new, full business plan or just a feasibility plan. Obviously, the larger the return on investment, the better off you’ll be.
Step 4: Decision
The plan helps determine whether to move ahead. By completing the plan, you are less likely to make an emotional, knee-jerk reaction and more likely to make a business decision that will have a high return on investment.
Three potential decisions exist for every business expansion: 1) no implementation 2) pilot or test the idea further or 3) start a full expansion.
Step 5: Pilot the idea
The least risky approach is to “try” the expansion before investing fully in the idea. For example, the engineering firm might develop a mini-marketing program to colleges and universities within 100 miles of its headquarters. Or the boutique might create a kiosk of its products to offer at community fairs and events.
In some instances, a pilot project is not feasible and in lieu of that you would develop a more detailed plan with more specific research to support your decision.
Step 6: Implementation
Once you have a plan and maybe piloted the idea, another decision is in order about whether to fully expand. This will involve many functions within your business: marketing, sales, operations, human resources, accounting and finance.
The most important task to start is to identify a target list of customers. After all, you don’t have a business without customers. Your priority should be building your customer list within your expansion, which in the long run yields the cash to support operations and other functions.
A good marketing resource can help build your target list and develop the marketing and communication tools to reach those people. Whenever possible, add the customers before you expend large amounts of cash.
Step 7: Evaluation
Just like when you started your business, the expansion requires constant evaluation to ensure profitable success. Initially, this could involve daily huddles to talk about how the real experience is mapping to the plan. Thereafter, monthly and quarterly financial, operations and marketing reviews are recommended.
Expansion can be realized in days or months depending on the level of complexity, investment dollars and amount of planning involved. Taking a business process approach will help to ensure success of your expansion.
Read other small business articles