What Is Business Expansion & What Are Some Strategies?
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Business Expansion Defined
Adding sales employees Increased marketing Opening in another location Adding franchisees Forming an alliance Offering new products or services Entering new markets Merging with or acquiring another business Expanding globally Expanding through the internet
How Business Expansion Works
Reasons for Expanding a Business
Your industry is positioned for growth. If your market or sector is expected to experience significant growth over the next five years, it could be an opportune time to grow your business right along with it. You’ve had a few years of steady cash flow. Before launching any expansion plans, you’ll want to make sure your company is financially prepared. If you’ve had a consistently growing customer base and steady profits, that’s a good sign that you can sustain growth. You have more business than you can handle. An occasional spike in business may be an anomaly, but if you consistently have more demand than you can supply, it can signal an opportunity for growth. You may want to first survey your customers to find out if they are interested in new products and get overall feedback about your business. If you learn they want more of your products, additional products or services, or faster delivery, it might be time to expand.
Pros and Cons of Business Expansion
Increasing Customer Base to Expand
Expanding by Diversifying
Horizontal diversification This involves acquiring or developing new products or services that are complementary to your core business and appeal to your current customers. To diversify in this way, you may need new technology and skills or a new marketing approach. Concentric diversification With this type of diversification, you add new products that have some technological or marketing crossover with your existing products but will attract new customers. You may be able to leverage your existing technologies, equipment, and marketing to diversify in this way. Conglomerate diversification This involves adding new products or services that are entirely different from and unrelated to your core business. The risks can be high with this type of diversification, since you’ll need to not only enter a new market but also to sell to a new consumer base. Vertical diversification This is when you expand backward or forward along the production chain of your product. With this approach, you may control more than one stage of the supply chain.
Mergers and Acquisitions
3 Small Business Loan Tips
Online lenders generally offer fast application reviews and quick access to cash. Conveniently, you can compare small business loans by filling out one application on Lantern by SoFi. Traditionally, lenders like to see a business that’s at least two years old when considering a small business loan. SBA loans are guaranteed by the U.S. Small Business Administration and typically offer favorable terms. They can also have more complicated applications and requirements than non-SBA business loans.
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