"The grass is greener over there, I just know it!" or "My grass is all dried up, I need to move and now!". These are common metaphors for a business owners desire to change their business, enter new markets, and serve new customers. I believe personal and business economic mobility are critical to a healthy life, business, and economy and so this post is one take on improving your odds of success in doing that. Below are several situations in which a business would want to enter a new market that are relevant to the work I do at Next Callings:
- A mid career small business owner is unsatisfied serving her current market and see's both growth potential in an adjacent market as well as potential simplification of business processes and management.
- A late career business owner is undecided as to whether completely retire or shift his business focus to a new, exciting, and potentially lucrative market.
- A competitor has entered a small business owners market with a lot of experience and an ability to drastically undercut his prices. While he has established customer relationships, in the current economy, the competitors prices will force a lot of customers to switch to this new competitor. The business owner has a wide experience base and believes focusing on a niche market and expanding his geographic range will keep him in business.
This post is about a few questions to think about before making big changes to enter a new market. The more honestly and fact based you answer these questions, the higher likelihood of successful entry you'll have. While nothing is guaranteed, these questions cover critical unknowns and variables that can improve your odds of success. I also want to help alleviate some business owners tendency to think of their strategy as "if we build it, they will come". While that works rarely, it's basically trial and error and can be expensive and time consuming. Doing some work on answering the following questions can help position an owner for success in their new market entry.
- How big is the market? How would you describe it? Are there key segments within the market you need to pay attention to? Perhaps there is a niche within this larger segment that, if you focus and deliver very high value, you can get penetration to the larger market?
- How are the new market customers to be accessed? Will your old methods of advertising, marketing, and customer engagement work the same? What needs to be changed? How much will it cost?
- What is the current make up of your business? Meaning, what systems, processes, resources, methods, etc. do you have that you need to understand so that you know where you're starting from and what is likely to change?
- The corollary to 2 is: given your current business system, what is the future one you think you're transition to? What assumptions are there underlying that future state? What are the priorities of your system to update, modify, dispose of, etc.? What kinds of risks/opportunities lie in this new market that you'll need to understand?
- How certain are you the new market is accessible by you or in other words, what's your likelihood anyone will care? Is the new market crowded with other services/products or is it underserved? How do they currently perceive value and can you over-deliver on that?
- How do you know the timing is right? Is it right for you, for the market, or both?
- What are the barriers to entry or perhaps the costs of switching to you from your prospective customers in the new market? Will it be easy for them to switch? If so, how can you keep the ones you do get?
- What bottlenecks or constraints do you have your business today that are limiting growth in your current market? Is the bottleneck you as a small business owner? Perhaps particular resources or skillsets that are limited compared to the demand? Will these bottlenecks get better, worse, or move to a different area in your business system when you enter the new market and change your products/service systems you're providing?
- What will be your advantage in the new market? What is the most compelling set of features, capabilities, offerings, etc. that will entice either new customers or customers to switch from their current products or services to yours? What is your "secret sauce" that will be remarkable for your new customers? You want word of your arrival in the market to spread quickly and reliably and the best way to do that is being remarkable to your customers and having them spread the word!
- What is the competitive landscape like? Will you be face to face with competitors on a regular basis? Is price how they compete? Price competition is a very tough market dynamic to enter unless you have the economies of scale or other advantage that your pricing can dramatically undercut existing competitors.
I hope answering some or all of these questions will expand your thinking on entering a new market and perhaps help you prepare more thoroughly for the barriers that may be in your way. It's an exciting thing to enter or change your market and can be akin to starting a whole new business. It can bring growth while also new energy and excitement to you as a business owner and to your employees. Of course, the other major piece to the effort of entering a new market, just like starting a successful business, is the True Grit required to persevere through the challenges, known and unknown that come your way. A little more preparation can go a long way in giving your Grit the foundation it needs to take you to your next calling, in business or life.