Assessing a new market for viability
Many successful businesses that grow look for ways to expand into a new market. It’s important to weigh the cost of entering a new market (especially if it’s an export market) with the potential returns.
The easiest potential for growth is to take the successful business model you have developed and duplicate it in another area.
A new market can be a new customer-type you have never targeted before in your current region, or the same type of customer in a new region.
Is it viable?
It’s important to determine if you should invest time and resources in trying to obtain a share of a new market. Assessing growth potential in new markets requires some common sense, critical thinking and analysis.
- Existing business information such as, demand compared to population, to assess market size (what it is currently, and if there’s future potential).
- Any competitors in the new market. Spend time researching if they are growing, which is a positive sign.
- If you’ll need to amend or adapt your product or service for the new market.
- Your possible market share and how much you estimate you can obtain.
- Identify the market segments, if there are there multiple segments and if you plan to compete in all of them.
- The profit margins you can expect.
Once you’ve determined that there’s a demand and you can make a profit from the new market, you can move ahead.
One of the main factors to take into account is what kind of potential the market has to continue growth. You could be entering a market on a short-term basis to take advantage of a demand with a specific time frame, but it’s often better to seek longevity for sustainable business growth.
Try to determine:
- There is an urgency to demand and you sell something people want right now, or will continue to need it in the future.
- If you are occupying a specific niche and if so, is it time-specific or will it endure.
- How quickly can you bring your product or service to market.
- The effort it will take to continue selling.
- If you have the necessary support for customers after the sale.
Testing the market
It’s always a good idea to trial your products and services in a new market before investing time and money in committing to it.
You can do this by:
- Exhibiting at relevant trade shows. You’ll not only get an idea of demand, but you can collect customer feedback and use that to amend your product or service for the new market.
- Visit customers in the new market. Find out what prospective customers are looking for in your industry.
- Conduct a trial or pilot by starting small and start trading in the new market. Limit your risk by short term leases, small production runs, offering only a few products or services. Once demand is proven you can scale up.
- Selling online to test demand.
The future crystal ball
Future consumer, economic and societal trends and situations can have significant impacts on businesses of every size, and change can happen quickly. Pay particular attention to any economic, social and industrial trends or changes that could impact your business.
- Read local, national and international news online and subscribe to news sources for your industry.
- Follow thought leaders and expert opinions and perspectives to deepen your understanding of the business environment.
A great example of how things can change is how today’s greater “global awareness” has prompted a growing market of people and organizations that make buying decisions based on social, political or environmental factors. Concerns about climate change mean more consumers are looking for ecofriendly solutions. It’s important to know about these trends so you can determine whether they will limit or expand the growth potential for your business.
Each industry and market has a lifecycle so it pays to understand the state of your specific industry and market and the factors that can influence your business.
Generally, the fewer competitors you have the more feasible your business is likely to be, but a lack of competitors could also indicate a declining market for your product. On the other hand, a declining market might provide you an opportunity to develop a specialist niche. While it may no longer pay for a large company to be in that a particular market, it could be ideal for your business.
But beware: an expanding market also could mean more competitors will soon emerge as they spot the opportunity, too. In addition, the few competitors already out there will respond aggressively and quickly when you enter the market.
No matter what wave of life your business is in, Sound Credit Union is here for you. Contact our Business Banking team today.