When is the right time to expand your business? What are the three core strategies of a business expansion?
As your business experiences rapid growth, Hamilton Helmer suggests that you scale production, grow your customer base, and lock in customers. Implementing these strategies during this stage of your business lifecycle will create numerous advantages, securing a strong position within the market.
Take a look at how to expand your business and become a challenge for your competitors.
Expanding Your Business
Helmer explains that once your learn how to expand your business, the growth signals a market in flux—an ideal environment to increase market share without immediate retaliation from competitors. However, once your growth rate stabilizes and market dynamics harden, it will become more challenging to adjust your competitive standing and capture new opportunities.
Strategy #1: Scale Production
To scale production, look for ways to multiply output without multiplying costs. This allows you to produce more with less, generating higher profit margins. As a result, you’ll have more money to invest in improving your business and you’ll be able to offer competitive prices for your products and services.
Additionally, this strategy will ward off competition, especially from smaller businesses, which face resource limitations coupled with smaller customer bases that prevent them from increasing their output. This means their expenses are higher and they must charge higher prices to cover them. Faced with these economic realities, they have limited options—they can either match your prices and see profits shrink, or maintain higher prices and risk losing market share.
How to Scale Production
Helmer suggests that you can effectively scale production by following four methods:
1) Increase production volume: Output more to spread fixed costs over more units. For example, produce more plant-based product variations to distribute manufacturing costs across more product lines.
2) Expand facilities: Upsize existing operational spaces and equipment to boost output without escalating overhead costs. For example, procure a larger warehouse to store more raw materials or larger delivery vans to transport more products at once.
3) Streamline supply and distribution: Consolidate and optimize your procurement, logistics, and fulfillment processes to enhance efficiency and reduce variable costs. For example, merge delivery routes from various farms to streamline the collection of raw materials and reduce travel times and fuel costs.
4) Negotiate supplier terms: Secure favorable deals with vendors to lower costs for key supplies. For example, buy key ingredients like soy or peas in bulk to secure cheaper prices.
Strategy #2: Grow Your Customer Base
To grow your customer base, develop products or services that become more valuable as more customers use them. This strategy allows you to charge premium prices and achieve market dominance in two ways:
1) A larger customer base increases benefits for individual users. For example, as more people use your plant-based meat substitutes and contribute to your blog, customers gain access to a wider variety of recipes and tips, enhancing the overall value of your products.
2) A growing customer base attracts third-party contributors. For example, your expanding plant-based community might attract partnerships with nutritionists or kitchen appliance manufacturers, further enhancing your product ecosystem’s functionality and value.
According to Helmer, this increased value draws even more customers, creating a self-reinforcing cycle that not only drives your success but also prevents competitors from luring away your customers. He explains that competitors with smaller customer bases can’t match the value provided by extensive user communities—and customers accustomed to community benefits are unwilling to switch to competitors offering less valuable alternatives.
How to Grow Your Customer Base
Helmer says you can grow your customer base by practicing five methods:
1) Prioritize quality: Perfect your core product or service before launching new product lines. This helps you satisfy early adopters, laying the groundwork for sustainable growth. For example, ensure your first plant-based meat substitute product is of high enough quality to attract and retain early adopters before introducing additional flavors.
2) Target a single market: Focus your efforts on penetrating your primary customer group instead of wasting resources competing for customers in adjacent markets. For example, instead of dispersing resources to engage broader vegetarian or health food markets, concentrate on developing a strong following within the flexitarian market.
3) Encourage market adoption: Develop partnerships and marketing campaigns to accelerate awareness and acquire customers. For example, form alliances with popular plant-based chefs or influencers to increase your company’s visibility and appeal.
4) Foster customer participation: Encourage active participation and build a community around your offerings. Engaged customers bring their own insights and experiences to your business, adding value. For example, encouraging customers to share recipes and cooking techniques promotes product usage and fosters a supportive community that boosts customer loyalty.
5) Expand your ecosystem: Introduce complementary products, services, and third-party integrations to make your offerings more useful and convenient for your customers. For example, develop partnerships with plant-based ingredient suppliers or kitchen appliance manufacturers to offer packages and discounts that increase the appeal and accessibility of plant-based cooking methods.
Strategy #3: Lock Customers In
To lock customers in, encourage them to dedicate time, effort, and resources to your products and services. This allows you to charge premium prices and deters competitors from poaching your customer base.
Helmer explains that the more time, effort, and resources customers invest in adopting your products, learning your systems, and building familiarity with your brand, the more resistant they become to trying other options. This resistance stems from customers’ reluctance to abandon their investments, the comfort they develop with your brand, and the disruption changing providers would cause to their established routines. These combined factors make it challenging and often unprofitable for competitors to attract your customer base, even if they offer better products or services.
How to Lock Customers In
According to Helmer, you can lock customers in with three methods:
1) Offer multiple benefits: Provide incentives to discourage customers from changing providers. For example, offer loyalty programs with accumulated points, provide specialized cooking equipment optimized for your products, and foster a strong online community of plant-based cooking enthusiasts.
2) Leverage customer routines: Integrate your products and services into customers’ daily workflows and habits to make your brand indispensable. For example, offer meal planning services such as subscription plans that deliver curated selections of your products, or a meal planning app that integrates with your brand’s smart kitchen appliances.
3) Ensure ongoing satisfaction: Focus on providing excellent customer service to foster trust and loyalty—happy customers are less likely to consider offers from other providers. For example, provide a forum for customers to share their feedback, promptly address their concerns, and adapt your services to meet their evolving needs and preferences.
