For many business operators, business growth is essential in sustaining a healthy and productive business environment. Many believe that without continued growth, operations may begin to stagnate, potentially resulting in declining customer service standards, slippage in employee morale, and ultimately, undesirable impacts on profitability.
Fortunately, there are many proven strategies for growing your staffing company, from market penetration to organic growth to growth through acquisition. In addition, market expansion is an effective strategy to consider if your company is structured with expandable resources and can leverage an established network to help pursue new markets.
One of the main reasons for market expansion is to extend your reach and put your services in front of more potential customers. While customer retention is critical, new customers are the lifeblood that drives a company to higher performance levels. By expanding into a new geographical area, you’re effectively entering a new marketplace–creating new opportunities to reach more customers.
Growth and expansion are critical goals for most business owners, but how can you expand your staffing business in today’s lackluster and slow-growth economy? In this article, we’ll focus on how to develop a market expansion strategy that can propel your business forward.
Opening a location in another city or state could mean increased revenue and improved profitability. But it also comes with specific challenges. Understanding a new market, managing expanded organizational communications, and maintaining a consistent company culture across additional offices require research, planning, and practical implementation. In addition, more administrative tasks are necessary, such as obtaining licenses, securing insurance, and setting up payroll taxes in a new state.
While growing profitability may be the desired result, you must carefully consider your company’s resources and ability to achieve strategic goals before engaging in market expansion plans.
Is market expansion suitable for your staffing company?
There are many reasons businesses want to grow, but regardless of your motivation, ensure you are well positioned to do so before taking action. In the case of a market expansion strategy, you’ll need to take careful stock of your ability to access additional finances, technology, and human resources, as these will impact your ability to expand the business successfully. Also, consider non-financial goals such as customer service excellence, employee turnover, and market leadership since these can directly affect your success.
If market expansion is your desired goal, effectively conduct due diligence, ensuring your best chance at creating a profitable venture. Gather information, analyze the data, and create a plan to ensure that your expansion decisions will help grow your business and avoid missteps.
Four steps to help you prepare for market expansion
Step 1. Develop a plan
Planning is critical to making an informed strategic decision regarding possible expansion into a new market. Start by making a plan that includes:
● Key stakeholders
Goals: The first step in developing your plan is identifying your goals. Be specific and make them measurable. For example, a goal of having an office in Florida making at least a 25% profit within six months of opening is specific and quantifiable.
Timelines: Your industry’s overall performance may dictate timelines for expansion. For example, medical staffing companies were in high demand during 2020, which required faster timelines for successfully executing company expansions. Staffing companies that responded quickly and efficiently capitalized well on increased market demand.
However, if there are no external time pressures, you’ll want to set internal deadlines for making decisions and executing actions. Timelines help organize your work by summarizing the milestones you need to achieve and in which order.
Key Players: Finally, identifying what staff positions are needed to be filled. Know who on your team is willing, able, and available to contribute to the end goal and what job positions require new hires.
Step 2. Gather research and data
With your basic plan in place, start collecting information to help inform your decision. Study the market you intend to enter. Leverage your professional network, review trade association publications, and talk with potential clients.
Take enough time to dig through resources. The Small Business Administration has information to help businesses like yours expand.
Step 3. Analyze and decide
After you’ve gathered the necessary information, it’s time to analyze the data and decide on a course of action.
If data analysis suggests that you can meet your defined goals, you’re ready to move forward in planning for the new location.
Step 4. Create a growth plan
Now that you’re ready to expand into new territory, it’s time to develop a more focused action plan. A growth plan combines strategy and specific steps to transform your business from its current state to its future state.
Current State: An assessment of the business’s existing customer segmentation, value propositions, finances, sales projections, and more.
Future State: The greater vision for the business defining where you want the company to be in terms of longer-term goals.
The critical objective of a growth plan is to define a set of actions to be taken that will bridge the gap between the current and future state. It will have a similar structure to your overall plan, including goals, timelines, and key players, but it will also have an extra section – progress monitoring.
Enacting the growth plan
Leverage your company’s strengths and acquire new resources to move your company towards desired long-term goals. Track advancement by monitoring actions and evaluating results to ensure progression is on target.
Leverage your company’s strengths
Utilize your greatest assets. Your existing team has helped you get to where you are. It makes sense to involve their help with the growth plan.
Maximize the strengths and expertise of your existing talent. Get them involved early to be involved in the day-to-day progress. This will allow your business to move at a healthy pace. Moving too quickly risks burnout, and moving too slowly means missing opportunities.
Acquire new resources
Chances are you’ll need additional resources to launch your new office successfully:
Technology: Tools for communication, data storage, and time management will be needed for geographically dispersed operations.
Additional talent: You may need a manager to lead the new location if you don’t have an existing employee willing to take on the new role. You’ll likely need support and sales staff as well. And, you’ll need to be able to recruit new talent for client contracts.
Network and community building: Joining local professional associations and sponsoring community events can help your company quickly gain exposure in the new territory.
Financing: Expansion can be costly at the start. Insurance, office rent, and licenses add up quickly. As you win new contracts, increased payroll burden will become an issue. If you don’t have the needed cash, join forces with an industry-specific financing partner that can provide the financial capacity.
Bank financing has become tight as commercial institutions restrict credit to medium and small businesses. Instead, research alternative lenders that provide payroll funding solutions. eCapital is a tech-enabled financing company that specializes in staffing company financing.
For example, in providing fast, flexible funding solutions, this innovative lender provided cash access to a medical staffing company in 2020 and 2021, allowing it to expand into four states with a $3 million line of credit that quickly grew to $16 million to help facilitate growth.
Further, an industry-specific lender such as eCapital has the experience and connections to provide market insights and expertise to help inform your expansion.
As your company initiates action, track progress by monitoring and evaluating results using metrics. These actions can be divided into milestones (completing a task by a specific date) and quantifiable by performance measures. Milestones can include:
- Conducting the market analysis.
- Securing an office location.
- Hiring key staff.
- Arranging additional funding to support the expansion.
Your metrics should track progress and move your employees toward the desired result. Regularly report progression to your team via short sessions and review your metrics more thoroughly at follow-up meetings held to discuss the implementation of your growth plan. Review your metrics at these meetings to ensure they provide helpful information and stimulate the best results.
Achieving positive results in a timely fashion is key to the success of your expansion. Once the evolution has occurred, continue using metrics to assess advancement towards long-term goals. New financial metrics should be introduced, such as profit, revenue, and cash flow. Dale Busbee, Senior Vice President at eCapital, says, “Within 6 to 12 months, you should start to see profitability.”
Your services will be exposed to a larger audience as your company expands. You’ll be able to convert more leads and earn more money by growing your client base. As a result of this, profits should rise.
Increased profitability is the primary objective, but the ability to tap into a new territory of qualified talent is an equally significant advantage of expanding. People are typically regarded as a company’s most valuable asset. These individuals will infuse your company with new ideas, streamline processes, and foster a sense of community.
Expanding your operations during a slow-growth economy will elevate your company’s market exposure. The expansion will convey success throughout the industry, providing a competitive advantage. Leverage this advantage and utilize the expertise of partnering services, such as an industry-specific lender, to best position your staffing company for continued success.
Since 2006, eCapital has been a trusted financial partner for thousands of small to mid-size companies in all stages of development. eCapital keeps pace with staffing agencies’ working capital requirements from startup to growth through business transition and economic disruption with tailored services and personalized attention. Our customer base continues to grow as our reputation for dedicated service and forward-thinking solutions to even the most complex situations endure.
For more information about how invoice factoring supports staffing agencies through all stages of development, visit eCapital.com.