Business history is filled with examples of companies successfully entering new markets and becoming leaders.
Apple and smartphones. Netflix expanding from mailing DVDs to video streaming. LinkedIn becoming a dominant player in online recruiting. Tesla's decision to leap into the market for battery--based power systems for homes, businesses and utilities.
But there have been many epic failures too. Anyone remember "health drink" Crystal Pepsi or Microsoft's Zune MP3 player?
Whether to enter to a new market is one of the most important decisions a growing company can make. But how do you know if you're making the right call?
Here are five questions you can ask yourself to make the best decision for your business:
1. How large is the new market?
You'll first need to identify the potential business you can get out of this new venture, seriously evaluating the field of customers you think you can connect with.
You might find that the market is much larger than you initially thought. You might also find that there is a very small number of potential customers or that the market is already saturated with other vendors.
This research can also help drive pricing, beyond comparing the price to your current rate card.
2. What will you and your team need to accomplish successfully serve the new market?
Addressing this new market might involve hiring new employees, creating a small team that focuses on the new market, writing apps or web interfaces, and much more.
Understand the work required not only to prototype the new product or service, but also to be able to sell it at scale. Understanding the required investment will help you make the decision on whether or not to move forward.
3. Do you have the skill set and tools available to sell your service into the new market?
Your sellers might be focused on a completely different demographic, and therefore might not be able to communicate on the same level with the new demographic.
You might not have any leads beyond the first customer. But you might be perfectly aligned to take on this new adventure!
4. Do you have buy-in from staff?
If you do your research and list out solid arguments for either proceeding or stopping, then getting buy-in from the staff should be simple. Make sure the market conditions are in your favor before introducing the idea to your team, and be careful not to impose.
5. What will the opportunity cost be to your core offerings?
If you aren't getting buy-in even though you have a good business plan, then you have to ask yourself why. Reaching outside of your core focus to go after a new market is risky.
Not only will it introduce you to a space where your company might not be a premium player, but you may also end up detracting from what has made you successful to date. Risks are healthy, as long as they're based on logic and reason rather than emotional responses.
Bottom line: Do your research, and listen to your staff. Don't try to put a square peg in a round hole unless it makes sense. Be open minded, just as you're asking others to be open minded.
Even if you decide that entering a new market isn't the right move right now, understand that the time you invested was not wasted. If the opportunity is not right for you, that potential customer will understand.
The time you spent researching better educates you on markets. The time you spent working with your employees to determine if the opportunity makes sense provides great bonding as a team. Every single person in the chain will respect you more if you back down on an initiative that isn't a smart business move.
And given that they'll share in the ownership of success, they'll also be elated when everyone gets huge bonuses if and when the initiative works out in the future!