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Should You Expand?

Many entrepreneurs are tempted to expand, but there's a good chance you could achieve similar outcomes more quickly with alternative strategies.

Should You Expand?

Many entrepreneurs are tempted to expand (particularly into new geographical markets) after overcoming their startup hurdles and establishing a stable customer base. Replicating a proven recipe for success may make intuitive sense, but it's worth applying a twofold litmus test:

1. What exactly are you trying to achieve?

2. Is expansion the best strategy for attaining your objectives?

If you simply want to make more money, then expansion is a questionable priority.

The biggest challenge in any business is convincing strangers to give you their hard-earned cash instead of sticking to their status quo. It's impossible to predict how long it will take to penetrate a new market or how much it will cost. And capturing demand from one market doesn't guarantee replication because markets are rarely homogenous. At the very least, you'll be up against new competitors.

So if you've already broken into one market (and likely incurred a whole lot of school fees along the way), why endure a fresh round of speculative risk instead of doubling down on your current footprint?

Attracting more customers in your current market, reducing customer churn, increasing customer spend, introducing new products or services, and optimising internal efficiencies are all more likely to pay off (and more likely to pay off more quickly) than venturing into new territory.

Expansion might make sense if you've spotted an uncontested market niche or if you've hit the point of diminishing returns in your current market, but these are improbable scenarios for many SMEs.

If you're still convinced that tapping into a new market is the best course of action, then at least consider whether a merger of acquisition makes more sense than an expansion. Absorbing a business that already has a foothold in your target market may involve more upfront investment, but if executed properly it'll almost certainly be quicker and less risky than trying to reinvent the wheel.