So you’ve tasted some success in your local market? Congratulations, but don’t bust out the champagne just yet. It’s when you decide to expand your geographic footprint that the fun really begins. Developing a profitable presence in a second (and third, and fourth…) market is easier said than done. A new location can mean new customers, but also new competitors and new challenges.
To assist me with this post, I enlisted the help of Marc Halpin, the CEO of Kapow Events, an online marketplace of corporate event experiences reshaping how companies entertain their clients, prospects and employees. Kapow is one of my portfolio companies via my FireStarter Fund investment. Kapow started their business in Chicago in 2012, and in just three years, has now successfully expanded into 16 other major U.S. markets. So, Marc is one of the pros on this topic.
Marc suggests there are five things to keep in mind as you expand your business to a new city:
1. Prioritize Your Desired Markets
My general rule-of-thumb on rolling into new markets is to have your list of target markets prioritized, and work it from the top down. For example, for many startups, that means following the largest population centers (e.g., launch in New York, before Los Angeles, before Chicago). That will hopefully ensure you are a first mover in the largest markets. The flipside to that would be, if you were a second mover, and wanted to lock-up markets the first mover has not yet entered, you could decide to avoid competiting in some of the larger markets, and become the first mover in some of the smaller markets.
2. Evaluate the Competition
It is one thing to edge out the competition in your backyard, and it is another thing altogether to plant your flag in new cities. As you evaluate competitors in a potential new market, assess where the gaps are in their offering. Then determine whether those gaps line up with what your business does well. Find your seam and exploit it. But, be careful about over-reacting to the competition. A strong focus on developing your product, your people and your sales process will pay dividends in the long run.
3. Bring Customers With You
Expanding to a new geography shouldn’t mean starting over. From a strategic standpoint, step one is determining which customers you can bring with you to the new market. Focus your initial marketing efforts at your current client or customer base, making sure they are aware of your presence in the new location. Make it easy for them to refer you to their local colleagues, and don’t be afraid to ask for introductions to their partners in the region.
4. Establish local relationships
Identify company leaders who are willing and able to provide on-the-ground support as you expand into new markets. But, equally importantly, seek out local talent. Your local sales force should be intimately familiar with the area and have the relationships to show for it. Place an emphasis on networking out of the gates. Be visible. Map out your short list of people and companies you need to be on a first name basis with, and make it happen.
5. Document your processes
There’s no one-size-fits-all to a new market launch. But, if you plan to scale by aggressively opening new locations, it is critical to document your processes: legal, finance, HR, sales and marketing included. Establish a proven blueprint, but don’t be afraid to adapt it and improve it as you go. Conduct a post-launch review to assess what areas were up to par and what could be improved the next time around. Wash, rinse and repeat.
Thanks again to Marc Halpin at Kapow Events for helping me research this topic. And, be sure to check out their website for more information about their business, and the markets they decided to enter first.
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