You’re a small business and want to expand. It’s true that most small businesses yearn for growth and to become bigger and expand their reach, but expansion is not always without its pitfalls.
It’s not uncommon for small businesses to make some serious mistakes when attempting to expand.
To shed some light on the subject, Small Business Trends caught up with Randy Nicolau, CEO of Poppin, sellers of office furniture and supplies and Roger Edgar, CEO of LUX LED Lighting, a California-based lighting solutions manufacturer to discuss their experiences with business expansion.
Small Business Expansion Mistakes to Avoid
The two CEOs of successfully expanding businesses, provided these tips on how small businesses can avoid making common expansion mistakes.
Failing to Understand Your Customer
One of the biggest mistakes small businesses make when trying to expand is failing to understand their customers and what their customers want. According to Randy Nicolau, the first step in understanding where you want to expand is understanding your customer.
“It’s important to look for pockets in your data sets and have a good commercial, gut sense and think about what you would benefit from in expanding. We had enough e-commerce data to do that and found we were over-indexing in certain markets,” says Nicolau.
Poppin analyzed its own data to find out that its sweet spot is 50 to 2,000 person companies in the Tech, Advertising, Media, and Information sectors who are also experiencing strong growth.
“We felt we could best serve the greater Los Angeles area from Santa Monica riding on the success of our existing showrooms in San Francisco’s SoMa District and New York City’s Flatiron neighborhood — both tech hubs within each city, respectively,” Nicolau told us.
Not Coming Up with A Credible Action Plan
Poppin’s CEO couldn’t overstate the value of creating an action plan that specifies how you will reach customers and achieve a competitive advantage within the new market.
“For instance, some companies are moving their call centers to up-and-coming cities like Detroit – where real estate is more affordable, and the city has potential to become a future tech hub,” said Nicolau.
The CEO added that Poppin is constantly thinking about how people work from industry to industry and from region to region.
“We knew entering the SF area that people are more ergonomically-conscious, so we launched our Sit-Stand Loft Desk in conjunction with opening our San Francisco office and showroom,” Nicolau added.
Not Looking at Industry News and Failing to Act Upon Trends and Changes
Another mistake small businesses can make when attempting to expand is failing to monitor industry news and act upon fluctuations and trends within the market.
Randy Nicolau explained how Poppin always has a pulse on industry news. Consequently, the company was able to choose the most lucrative location for its new office space in LA, based on the fact that the location they decided on has the biggest company density and millionaires that may be looking to start their own business, so that Poppin will be “there to greet them.”
Failing to Listen to Demand
According to Randy Nicolau, it is vital that small businesses decide if they have the sales channels, infrastructure, and customer relationships in place to launch in the new market, and determine where to leverage their core competencies.
Nicolau used Poppin as an example of how the company listened to demand before locating to a new area, stating:
“Building a sales team in San Francisco was a no-brainer for us. We knew we were already working with companies like Google and Facebook on both coasts, so we listened to the demand.”
Underestimating the Importance of Identifying Resource and Skills Gaps Early On
Small businesses that underestimate the importance of identifying resource and skills gaps early on, are setting themselves up for problems. As Randy Nicolau says, sustaining early market success will depend on identifying resource and skill gaps early on and quickly filling them.
“Think about what expansion would entail, and how it could affect operations, especially when it comes to managing a new office on a different coast,” advices the CEO.
Disregarding Long-Term Employee Counts
Another mistake businesses can make when it comes to expanding, is disregarding long-term employee counts. When planning for expansion, small businesses need to think about employee count and what it will look like in six months to a year’s time.
As Randy Nicolau notes:
“This will impact your space planning and overall design.”
Avoiding Extensive Market Research
Failing to conduct extensive market research is another mistake small businesses can make when attempting to expand.
LUX LED Lighting provides a good example of a businesses that has successfully expanded by conducting ample market research.
With a goal to double its revenue annually, LUX LED Lighting, recently decided to expand into the direct-to-consumer market with the launch of a new website and ecommerce platform.
Roger Edgar, LUX LED Lighting CEO, explains how extensive research played a vital role in the company’s successful expansion, stating:
“After extensive market feedback, we realized there was large consumer demand for our LED lighting solutions. The new direct-to-consumer platform allows us to broaden our community and customer base.”
Overlooking Potential Pitfalls of Expansion
Edgar also notes how LUX LED Lighting took measured steps to determine the plausibility of success and potential pitfalls before launching the product line. Edgar says LUX LED Lighting:
“Patiently surveyed the market helped to shape our strategy from product development and distribution channels, to where and how we presented the brand.”
Failing to Demonstrate Differentiation and Value
According to Roger Edgar, in the current digital brand building landscape, brands must compete at every turn to demonstrate differentiation and value, something that is best managed from within.
“While expanding into these new markets, the temptation to release control in exchange for early exposure has been constant. Many brands find these opportunities so alluring that they inevitably find themselves scrambling to regain footing and put the proverbial genie back in the bottle,” the CEO warns.
Not Investing Adequate Time and Resources into Expansion Goals and Techniques
Failing to devote sufficient time and resources into expansion goals and techniques is another failing small businesses can make when trying to expand.
As Randy Nicolau notes, “Of course, these tips aren’t an exact ‘recipe for success,’ but the investment of time and resources into these preliminary steps should help you mitigate the risk of entering into a new market.”
Are you a small business which has successfully expanded? We’d love to hear your expansion success stories.
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