Every entrepreneur wants to scale their business. And while expanding your business offerings may boost your earnings, the decision isn’t always simple. Adding an additional product or service lines could help you reach a wider customer base, true. But you also need the resources to do so.
So how do you know when it’s time to expand your offerings? As with many business decisions, there isn’t a cut-and-dried answer. You need to focus on your business goals and needs. Ask yourself these seven questions to decide whether expanding is the right move for you.
1. Will the New Offering Fulfill an Identified Customer Need?
As a business owner, your customers drive your “why.” Their wants and needs should also drive your decision to expand your products or services. You want to make sure there’s a market for your new line, so think about which need you’re looking to fulfill.
Nurx, a telehealth platform, saw a market beyond their sexual health offerings like online birth control when patients asked about migraine and acne treatments. This is an example of a business expanding their products and services based on needs voiced by your existing base. It turns out the patient bases for birth control, acne treatment, and migraine medication intersect. Look for these intersections when determining whether to expand your own offerings.
2. Can You Fund an Expansion?
New product or service lines can ultimately boost your bottom line. However, you need to fund the expansion first. When adding a new product, you’ll have to develop new inventory, packaging, and promotional materials. Similarly, a new service line requires space in your marketing budget and, potentially, employee training.
This is where a classic cost-benefit analysis comes in. Assess how much an expansion will cost and how you’re going to fund it. Compare these numbers to your projected revenue. Businesses with reliable revenue streams may find expansion more feasible. However, newer businesses may need to take out a loan or wait until they have extra cash on hand.
3. Will an Expansion Complement Your Current Offerings?
Consider whether these new products or services will fit in with your existing offerings. Some business owners may realize that they’re trying to pivot too much (like a roofing business deciding to sell ice cream). When it comes to expansion, the new should complement the old.
Remember, your expansion should make sense for your current customers, brand, and overall business strategy. With this in mind, the roofing business might start offering siding installation as well. Some customers would opt for both services, yet the business could reach customers who want siding installation exclusively. The new offering would also fit under the same home improvement umbrella — no rebranding required.
4. Could Other Offerings Suffer?
A business expansion should be an enhancement, not a distraction. Some business owners make the mistake of adding a new product or service that’s too similar to their existing offerings. Customers flock to the new product or service and abandon the other, cannibalizing the existing product line. This could sabotage your plans for a rise in revenue.
Again, you want your products and services to complement each other. Your new line should be unique while catering to a similar customer base. Preliminary market research will help you determine whether there’s a demand. Scope out your competition, and when in doubt, ask your customers what they’re looking for.
5. Will You Need to Hire New Staff?
If you’re launching a new service line, you’ll need people to perform that service. This could mean hiring new employees, which is another expense. You’ll need to ensure that your projected revenue supports that. There’s also the time commitment required for recruiting, interviewing, and training new employees.
As for a new product, the burden on your staff will depend on the size of the line. If you’re significantly scaling your inventory, it may be worth having some extra hands on deck. However, you should make hiring decisions based on your current capacity. Some further training on how to promote the new product may be enough.
6. How Will You Adjust Your Marketing Plan?
Expanding your product or service line is only half the battle. You also need to promote it. Adding a new offering will require a marketing campaign and, sometimes, a full overhaul of your marketing plan. This is something you must plan for ahead of time.
Marketing a new product or service is all about positioning it within the market, as well as within your own brand. You’ll want to strategically time the launch and carefully curate the launch message. You may need to adjust your marketing based on how the offering is performing, so be sure to track your sales trends.
If you’re ready to broaden your menu of services, it may also be time to invest in a marketing consultant or agency (if you haven’t already). These professionals will help ensure that your new products or services fit into your overall brand. They will also promote the launch, using social media and other channels to pique customer interest.
7. Is Now The Right Time?
There isn’t always a perfect time to add new products or services. However, you should make sure this business decision supports your short- and long-term goals. If you’re secure in your business and the market is primed, it’s time to launch the expansion. Adding product or service lines is often the next logical step for thriving businesses.
Business owners facing limited funds may want to wait a few quarters to get on their feet. This is also the case if you’re still learning about your customer base. If you’re struggling to sell one line, introducing another isn’t always the solution. You want to set a solid foundation first.
Final Words
Introducing a new product or service for the sake of it won’t necessarily support your bottom line. However, providing value to your customers and marketing the new offering effectively can boost revenue. The key is to balance your new product or service with your existing ones and make a plan to sustain them. This is when you’ll see a new offering flourish.
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