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Business Development Plan to Optimize Expansion

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business development planBusiness plans are recognized decision-making tools which contain a formal statement of goals, an action plan and a road map to success.  A business development plan is necessary to move key initiatives from strategy to performance. The plan can and should be utilized in all types of companies, circumstances, and functions.

Business expansion is a key business initiative that can be optimized by crafting an actionable optimum business development plan.

Business Expansion

Congratulations! Your business has attained the goals that you initially strived to achieve and is considered a success.  As an entrepreneur, small or midsize business, you have proven your ability to meet challenges and find solutions. Pursuing business growth is your next most exciting challenge.

Growth makes business sense for:

  • Better brand recognition
  • Building value in the business
  • Offering a wider range of products and services to a larger geographical market
  • Creating “economies of scale”

Setting a course for business expansion is seldom easy.  Developing a professional business development plan with an actionable expansion strategy is an essential tool to best transition your business to the next level of success.

Business expansions typically fall under two categories:  Intensive Growth Strategies and Integrative Growth Strategies.

Intensive Growth Strategies

  • Market Penetration

The least risky growth strategy for any business is to simply sell more of its current products to its current customers. This strategy is perfected by consumer goods companies.  Think 6-pack, 12-pack, 24-pack boxes and different size bottles of Coke or Pepsi.

  • Market Development

This growth strategy is based on selling more of your current product to an adjacent market. Offering your product or service to customers in another city or state are key examples.  Franchising is a recognized tool for market development.

  • Alternative Channels

This growth strategy involves pursuing customers in a different way, such as, selling your products on-line. When Apple added its retail division, it adopted an alternative channel strategy.

  • Product Development

Growth is also achieved by developing new products to sell to your existing and potential customers.  Nike mastered product development with products like its Air Jordan basketball shoes.

  • New Products for New Customers

Sometimes, market conditions dictate that you must create new products for new customers, as Polaris, the recreational vehicle manufacturer found out. For years, the company produced only snowmobiles. Then, after several mild winters, the company was in dire straits. Fortunately, it developed a wildly successful series of four-wheel all-terrain vehicles, opening up an entirely new market.

Integrative Growth Strategies

These acquisition strategies can run parallel to intensive growth strategies or as a sole focus of business expansion. There are three key forms of acquisitions:

  • Horizontal

This growth strategy involves buying a competing business. Employing such a strategy not only adds to your company’s growth, it also eliminates another barrier standing in your way of future growth—namely, a real or potential competitor.  Many breakthrough companies such as Paychex, the payroll processing company, and Intuit, the maker of personal and small business tax and accounting software, acquired key competitors over the years. These acquisitions served as both a shortcut to product development and a way to increase their share of the market.

  • Backward

A backward integrative growth strategy involves buying a supplier in order to better control your supply chain. This strategy could help you to develop new products faster and potentially, at a lower cost. Fastenal, a company that sells nuts and bolts, made the decision to acquire several tool and die makers as a way to introduce custom-part manufacturing capabilities to its clients.

  • Forward

Acquisitions can also be focused on buying component companies that are part of your distribution chain.  For instance, if you were a garment manufacturer, you could begin buying retail stores as a means to push your product at the expense of your competition.

Gaining an Advantage from Expansion

Numerous advantages are garnered through business expansion:

  • Build Business Value by Dominating a Market Niche

Business growth may give your business the advantage it needs to be a leader in a market niche. You can move into new geographic markets, acquire more customers or provide the next level of service to your present customers – perhaps, a service they have been asking you for. Growing your brand brings value to your business and quality to your customers. Both are important in creating goodwill in the marketplace.

  • Attract and Retain the Best Employees

Attracting and retaining top-notch human talent is a key tenet of business success. The excitement of growth offers the potential for career challenges that inspire skilled employees. Growing businesses offer change and the need to acquire new knowledge – something that younger employees seek and the global economy demands.

  • Land the Major Clients

Landing a major client or contract can give your business the prestige that it needs to compel others to follow. As you expand your presence, financiers will take you more seriously and you will increase your marketplace strength.

  • Achieve Economies of Scale

The age old concept in business is economies of scale. This means that bigger businesses achieve lower costs per unit and stretch administration dollars over a larger product line: marketing, professional fees, insurance and banking charges, to name a few. This economy of scale contributes to having more money for R&D, branding, capacity expansion, employee training and education, investment in new technology and more productivity from employees.

The Growth Foundation

Growing your business also presents business ownership with a myriad of issues that have to be addressed. Growth causes a variety of changes, all of which present different managerial, legal, and financial challenges.

Applying a SWOT analysis is a useful tool to determine where gaps need to be addressed as you prepare to expand.  The management team should use the SWOT analysis to evaluate each area of the company.  A typical SWOT analysis looks like this:

  • Strengths (Internal to Organization)
  • Weaknesses (Internal to Organization)
  • Opportunities (External Environment)
  • Threats (External Environment)

Understanding and Managing Risk

By acknowledging the risks inherent in business expansions, you can seek out solutions, learn from others who have faced the same challenges, and gain confidence in forging on with your business expansion strategies.  Remember that your employees, suppliers, partners and customers are key constituents who can support and champion your initiative.

  • Business Partner Risk

Choose your business partners wisely. Bringing on business partners and signing covenants can make an entrepreneur feel like they are losing control and independence. If you cannot grow without taking on a new partner then the three questions to ask yourself when evaluating a potential partnership’s worth are:

  1. Is it a good fit strategically?
  2. Is it a good fit operationally?
  3. Will this business partner be reliable and supportive?
  • Business Infrastructure Risks

Business growth brings pressures to a system that may not have had the time/experience to gear up for increased production or services. New timings of payables/receivables may create financial strain. Customers may feel under-served. Employees may be uneasy about all the changes. The owner(s) and management may not have the right skills. A list of organizational strengths and weaknesses will determine gaps that need to be addressed. As an example, you may need to consider outsourcing, bringing in executive(s) savvy in expansions, or utilizing consultants skilled at leading functional areas through business expansions.

  • Competitive Risks

Pushing your existing product into new markets, or new products into existing markets will be unfamiliar and may have unanticipated results. Also as you push up against larger competitors, don’t be surprised if they fight back!

  • Global Expansion Risks

Global expansions should be aided by market research, beta testing and new marketing strategies. This tactic may require a superior location, additional sales staffing, different pricing strategies and new/improved marketing techniques, among others.

There are several factors to consider with global expansion including the following:

  • Be respectful of cultural differences
  • Bricks and mortar footprint
  • Plan for long lead times
  • Be patient
  • Partner early in the process
  • Types of financing you may need for expansion and/or export
  • Increased line of credit
  • Use of export/import letters of credit
  • Political risk insurance

Due Diligence

A business expansion will involve a significant amount of due diligence by the executive team, legal counsel, finance, and other functional areas. By being prepared with a comprehensive due diligence list, the business expansion process can go smoothly and quickly, serving the best interests of all parties.

Following is a list of key due diligence items to optimize your business development plan:

  • Disclosure Schedule
  • Financial Matters
  • Return on Investment Scenarios
  • Cash and Liquidity Forecasts
  • Information Technology
  • Intellectual Property
  • Customers/Sales. Need to fully understand the customer base including the level of concentration of the largest customers as well as the sales pipeline.
  • Strategic Fit
  • Material Contracts. One of the most time-consuming (but critical) components of a due diligence inquiry
  • Employee/Management Concerns
  • Legal/Litigation
  • Tax Matters
  • Antitrust and Regulatory Issues
  • Insurance
  • General Corporate Matters
  • Environmental Issues
  • Related Party Transactions
  • Governmental Regulations, Filings, and Compliance with Laws
  • Property
  • Production-Related
  • Supply Chain
  • Marketing Arrangements
  • Competitive Landscape
  • Physical Assets
  • Real Estate
  • Licenses and Permits
  • Articles and Publicity

Business Development Plan

The business development plan is best prepared by professional business plan writers. This critical document will be prepared for the board, potential partners, bankers and potential investors and the plan design will encompass:

  • An executive summary that outlines the company’s history, including its successes and accomplishments. It should also cover the business’ goals, current facilities and equipment, and employees. The summary should also contain information on the proposed business expansion.
  • A description of your target market by demographics, such as age, gender and socioeconomic status. An explanation of your current marketing tactics and how they are implemented is necessary. If you’ll be changing your marketing plan with the expansion, outline these changes.
  • Details about your competition, including differences and similarities in services, target market and marketing tactics. Focus on how your business is unique from others that offer the same type of service or products. Elaborate on how your expansion will set your business apart from the competition.
  • Information about your management team. Provide their names, duties performed for the business, and information about their skills or training related to the business. If you’ll be taking on new partners or managers in the expansion, provide details on the duties and attributes to the business.
  • An outline of the daily operations of the business. Describe the day-to-day activities, such as providing services and marketing, as well as who is responsible for assuring these activities are completed. If the daily activities will change with the proposed expansion, provide information on what will be different.
  • Financial details about the business, including current statements that show expenses and income, and net worth. Outline the costs related to the expansion as well as projected profits over the next year.
  • Needs for additional capital, if required, describing how much and potential sources.
  • An appendix for supplemental materials that don’t fit in the other sections. For example, if your business development plan involves expanding or building a facility, include blueprints of the proposed project. This section is also deployed to provide other documents, such as permits.

Conclusion

A professional business development plan not only provides a valuable finished product in hand, it provides additional value during the process of research and thinking about your business in a systematic way. The act of planning helps you to think through issues thoroughly, study and research when you are not sure of the facts, and look at your ideas critically. It takes time, but avoids costly, perhaps disastrous future mistakes.

If your business has attained success in meeting the goals that were initially sought and you are now considering pursuing business expansion, a top-notch business development plan created by seasoned business plan writers will place you on the right path for future success.

A first-rate business plan can’t guarantee success, but it can go a very long way toward reducing the odds of failure. Professional business expansion plans are essential tools for transitioning key initiatives from strategy to optimum results.

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Brian J. Bertaux, CPA, MBA is a business executive and CPA whose accomplished 25+ year career includes serving private and public companies ranging from $20 million to $2 billion in annual revenue.  As a distinguished member of the OptimalThinking.com business plan writing team, he brings proven experience in moving businesses forward by developing and communicating results oriented business plans and making recommendations for growing revenue, reducing costs, business turnarounds, funding initiatives, generating cash flow, optimizing liquidity, and increasing shareholder wealth.

3 Responses to “Business Development Plan to Optimize Expansion”

  1. Jack Walsh says:

    Thank you for posting this informative article. It has inspired me to have our business plan reviewed and updated. We had a business plan written by business plan writers 2 years ago that helped but wasn’t nearly as complete as your approach. Your article inspired me to consider some great new options to grow our business.

  2. Paul Angles says:

    Superbly written article. Covers all the major points that we’re considering in our expansion plans and many that we hadn’t.

  3. Susan Smith says:

    Excellent informative article. Keep them coming.

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