Not to be confused with the new business generated by organic growth initiatives, this is about expanding the business in a more tangential way.
There are several ways to approach this, some of which are treated in separate sections elsewhere on the site.
At its most basic, that might mean developing products or services that are allied to your core offering but appeal to a wider or different audience – or can help you sell more to your existing customer base.
When I ran a sales promotion agency, we doubled our business in a couple of years by adding direct marketing to our offering. If you are a lettings agency, you might decide to add property sales to your business portfolio. If you make furniture, you might expand into garden furniture. Different but related markets, often with overlapping customers, underpinned by your existing back-office administration and services.
Alternatively you might decide to open an office or premises in a different part of the country – or a different country. Wouldn’t it be brilliant to have a Paris or New York office (or both)?
The biggest issue here is how you are going to staff and manage any new facility. I saw evidence of these difficulties when running the marketing services agency in the 90s. The European market was starting to make a real impact on our trade; several big corporates were experimenting with pan-European promotions (we ran one ourselves for paper manufacturers, Wigggins Teape); and a number of our competitors felt that they needed a presence in one or more European capitals to prove their ability to deliver (or just get themselves on the pitch list).
For many it proved disastrous. At least one went into receivership as a result. Almost without exception, the difficulties of recruiting the right people in a different culture – and more importantly, controlling and managing them effectively – created havoc in businesses where there was already very little slack in the system, either managerially or financially.
Opening a new branch, wherever it is located, is bound to put a strain on your resources, so having a very clear and unambiguous business plan for it is arguably even more important than when the core business started.
Having clear lines of communication and managerial oversight, regular reporting with accurate up-to-date figures, and frequent visits to check activity and progress on location are all essential. Check out any of the Far East corporates with major operations in the UK: I bet there are one or two natives at a high managerial level, effectively acting as spy in the camp and reporting back to Head Office on all the local goings-on.
If you don’t have the time or resource to do all that, you’re probably taking a gamble. You might still decide to do it, as long as (like in any casino) you set a clear stop-loss – the amount you are prepared to lose before the experiment comes good and begins to make profits.
But there are ways of expanding geographically that carry much less financial risk – though they do of necessity produce lower returns too.
Other growth methods include franchising and acquisition. These are treated separately elsewhere.