How to Create a Business Expansion Strategy
How to expand your business and the different strategies to achieve success.
Please note that this article is intended for educational purposes only and should not be deemed to be or used as legal, employment, or health & safety advice. For guidance or advice specific to your business, consult with a qualified professional.
Small businesses are often prime targets for growth precisely because they are small. Only a few small businesses grow into huge enterprises. Most can grow significantly within their local area or sector. This business growth can result in higher profits for their owners. It is important to apply the right business expansion strategy.
Three kinds of growth
There are three main types of growth that businesses can aim for:
- Internal growth
- Organic growth
- Strategic growth
Internal and organic growth
Internal growth is focused on increasing profits rather than on business expansion. It aims to optimise processes to minimise costs. This makes it possible for the business to retain more of the revenue it generates.
Organic growth is the process of growth by natural expansion. Like internal growth, it tends to be focused on internal processes. The key difference is that it optimises processes for maximum business growth rather than minimum cost. In many cases, these two goals can be satisfied with the same measures. When they cannot, a business has to prioritise one over the other.
For example, if a business improves productivity, this generally leads to higher profits (internal growth) and opportunities to increase its market share (organic growth). By contrast, if a business discovers that it can increase its speed of production for an increased cost, it has to choose one goal or the other.
Increasing costs goes against the principle of internal growth. If greater production speed would create the opportunity to increase organic growth, for example, by growing market share, then it could be worth the extra cost.
Strategic growth is when a business makes a strategic decision to focus on a particular area of growth. The business incorporates this objective into its business plan and sets out its strategy for achieving this growth.
This kind of growth strategy can be very resource-intensive. That means business owners need to determine how they’re going to finance it. For example, you could take on debt or open yourself up for investment. Alternatively, you might want to collaborate with partners.
With enterprises, working with partners could mean using mergers or acquisitions essentially to buy the resources you need or want. With small businesses, this is less likely purely because you are less likely to have the funds for mergers and acquisitions. You can, however, still work in collaboration with other companies. For example, you can run joint ventures together.
Set out your strategy for business expansion
Once you’ve decided what form of growth to aim for, create a realistic growth strategy. Here are the points you need to cover.
Define your objectives
Business growth is an abstract goal, so reframe it as a specific one. For example, if you are aiming for organic growth, then your goal might be to expand the customer base for your existing products or services. If you are aiming for strategic growth, your goal might be to diversify your range by creating new products or services.
Then define how success in this area would be measured. For example, if you want to expand your customer base, you might move into new markets. Your definition of success could be to open a certain number of new stores in specific new locations and to achieve a certain level of both revenue and profit. By contrast, if you want to expand your range of products or services, your definition of success might be to launch a new product or service.
Whatever your objective is, have a measurable definition of success for it. Also specify a timescale by which it should be achieved and a budget for achieving it.
Assess the feasibility of your goals
Never commit to a goal without fully assessing its feasibility. That means conducting thorough market analysis with an open mind. The nature of this market analysis depends on your specific plans. All market analysis aims to determine whether or not there is really a viable level of demand for what a business would like to do.
This requires businesses to assess the current state of the market. In particular, find out if there is any existing competition. If there is, how will you differentiate yourself from it and why do you think your unique selling point will appeal to customers?
If there isn’t any existing competition, why is that? Has nobody tried to enter that market? If so, why has it not been tapped? If other companies entered it but exited it, how will your small business succeed where the competition didn’t?
Be as thorough and objective as you possibly can. In fact, it may be worth hiring an external agency to ensure that you do not accidentally bias your results towards what you want to see. If the result of your market analysis is that your strategy for business expansion will not work for now, adjust it or even make a completely new strategy.
If you do make any changes, update your market analysis to reflect them. This does not mean that you have to do everything again from scratch. It may simply mean ensuring that you have been as thorough with your revised goal as you were with your initial one.
Set out your strategy for success
Once you’ve established that your goal is feasible, split it up into smaller objectives. Also identify which of these objectives depend on each other and which are independent of each other. This shows which objectives can only be tackled once other objectives have been achieved, and which can be tackled at the same time as others. Gantt charting can be useful for this.
This exercise should result in a basic plan for your business expansion. Your next step is to fill in the details for a clear path towards your goal. This includes setting out the strategy or strategies to achieve each objective.
For example, if your goal involves finding new customers, it probably requires some level of marketing. What sort of marketing strategy will you use? For example, will you aim to generate organic social media coverage or try to work with legacy media?
Specify what resources you need
Your two key resources are time and finance. For time, specify a deadline for the completion of your expansion project. Also specify milestone deadlines for various parts of the project. For example, ensure that certain objectives are completed as early as possible so that you can proceed with dependent objectives.
For finance, set an overall budget for the expansion project. It may also be advisable to allocate funds specifically to each objective within the overall project. Think very carefully about what level of resource you need.
In particular, think about whether or not you need to buy resources specifically for your project. For example, do you need tools (e.g. paid-for data sources), software (e.g. project-management software) or third-party services (e.g consulting)?
Implement your plan and monitor it
For all the hard work you have done so far, your expansion plan is still a starting point, rather than an endpoint. To make the most of it, monitor it carefully. On the one hand, give each step in your expansion plan enough time to have a reasonable chance to succeed.
On the other hand, have the confidence to make adjustments if it becomes clear they are necessary, or even to cancel your plans completely. Remember, circumstances can change while your expansion plan is in progress. The more thoroughly you do your groundwork, the easier expanding your business is likely to be.
Transition to business as usual
Once you have achieved your goal, then expanding your business in that way is no longer a specific expansion project. It will be business as usual. The final stage of your plan is to transition what you have gained through your expansion into your core operations. If you wish, you can then start a new expansion project.
Information at any stage.
Launch your business
From choosing the right business licence and insurance to setting up payroll and hiring your first employee, we’ve got the resources and information you need to start your business successfully.
Manage your business
Once your business is actually open, learn how to manage its everyday activities. Finance, operations, marketing – they’re all down to you. We give you the help and advice you need to get to grips with these.