It’s good to look ahead and plan for business growth and diversity; no business can succeed by standing still. But before you go ahead and invest in diversifying or expanding your business, you should go through a similar research process to the one you went through (or should have gone through!) when you started your business originally.
Consider Your Competition
If a competitor is already supplying a similar service or product, how will you compete? Check out your competitors online, if appropriate, and locally, to see exactly what they offer and how much they charge for it. It’s also worth checking if any competitors have tried diversifying into an area you have your eye on, and failed – how will you make your approach different to avoid making the same mistakes, or is it an idea that just won’t work in your area or with your present customer base?
Consider Your Market
Is there space for your sideline? If every other similar business has had the same idea, then perhaps not. If you want to win their customers, you’ll need something unique, cheaper, or higher quality than their offerings.
Who is your target customer? Will your current customer base be interested in what you’re offering and if not, how will you attract new ones? Perhaps you should create a completely separate business rather than trying to hitch up your new project to your current one.
How old are your new target customers, and how and where do they spend their money? How will you draw them in – will you need to use different promotion methods and advertising outlets? Check out local and trade publications and considering doing some market research of your own via internet surveys or leaflet dropping.
Consider Other Complementary Income Streams
Perhaps, rather than diversifying, you could partner up with another company with complementary products or services that sit well alongside your own? Maybe you could sell their products or services on your website, and vice versa, agreeing that the host company will either take a percentage of the purchase price or a commission. If you’re making your own aromatherapy products, for instance, then teaming up with an aromatherapist, complementary therapist or bath and shower product company could make good business sense.
Consider Your Overheads
Make sure you’re aware of exactly how much this new sideline will cost. Many a company has stretched too far or too wide, leading to the eventual downfall of their original and previously successful business. Will you need more room for stock, a loan to cover initial costs and equipment, or even an extra employee to manage the additional workload? What about any extra tax, insurance, heating, power, water, phone and internet charges your sideline will incur, and the cost of promotion?
Taking the Plunge
Don’t let this list of ponderings put you off. Your idea may be brilliant – but like any business idea, before you put your their money and time into it, you should have all the facts to hand. Nobody can guarantee success, but solid research can at least help you avoid investing in something that’s destined to fail. And of course, any potential investor, lender or sponsor you approach will want you to have a realistic, well-researched plan that includes estimated costs and turnover.
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