Are you ready to grow (pt 1)?

If your business plan is to grow in a new market you need to check you are ready.

To use the mountain climbing analogy, before climbing a mountain you have to establish base camp and carry out an equipment check. Base camp is having a proven product (and for the purpose of this article this includes your service offering) and a good share of your existing market.

How can you tell whether you have a proven product/service?

Here are three key indicators.

Do you have a good share of your existing market? This indicates whether you have a competitive product/service offer and an effective sales process.

The amount of market share that indicates you are ready to take on another market varies according to the nature of your existing market, however, having a 20% share is a rough guide to what might be competitive.

Secondly, are you achieving the expected level of profitability in your exist market? What this indicates is:

1) Whether you have a product/service offer whose delivery is straight forward and has limited unexpected costs (product returns, warranty costs, site revisits etc), and,

2) That you have a repeatable sales process with a reasonable conversion rate

The third indicator is do you have reference customers that are recognized outside of your existing market. No buyer likes to take risks on something that is new so have you proved that buying your product/service is low risk by having suitable references.

While having a good share of your existing market will help determine whether you have a proven product, it also gives one further test as to whether you should enter a new market. How easy is it to grow your share in your existing market? This is a more complex question as the answer depends on multiple factors such as the number and strength of your competitors, the number of available customers and their buying characteristics. While it may take some effort to establish this, it is an important thing to check because all other factors being equal it will be easier to get one more customer in your existing market rather than your first customer in a new one.