Assessing a new market for viability

Expanding into a new market is an exciting way to grow your business, but it requires careful planning and analysis to be successful. Whether you’re entering a different geographic region, targeting a new customer segment, or exploring an entirely new industry, it’s important to assess the potential and risks before making a significant investment.

Determining viability

The first thing to determine is if you should invest time and resources in trying to obtain a share of a new market. Assessing growth potential in new markets requires common sense, critical thinking and analysis.

Review:

Market demands, such as the size and potential growth of the market, the target audience and their needs and purchasing power, and the overall industry landscape. Consider whether there is a demand for your product or service, or if there is a gap your business can fill.
Financial feasibility, which will determine whether it’s worth it financially for you to enter the new market. You’ll need to explore the cost of market entry, any necessary investments in infrastructure, and the costs of marketing and distribution. Compare that with your projected sales and profits to determine whether it’s financially reasonable to enter the market.
Distribution channels to determine whether there are potential partnerships, suppliers, or networks to support your business as it enters the market. These may make it easier for you to expand into the market and may save you money.
Competitors and how they will affect your success. Be clear on your points of differentiation. Evaluate their strengths, weaknesses, pricing strategies, customer base, and market share. Determine whether there is room for your business to compete.
Forming alliances with established local businesses can reduce costs and ease market entry.

Once you’ve determined that there’s a demand and you can make a profit from the new market after any expenses are deducted, you can move ahead with the next steps.

Examining market potential

One of the main factors to consider is what kind of potential the market has for continued growth. You could be entering a market on a short-term basis to take advantage of a certain demand within a specific time frame, but it’s often better to seek longevity for sustainable business growth.

You need to determine:

Whether there is a temporary, urgent demand now or whether the need for your product or service will exist in the future.
If you are occupying a specific niche and if so, whether your niche can easily be adapted to market changes.
How quickly and efficiently you can bring your product or service to the market and earn a profit.
Whether your product or service is one that customers will need to buy repeatedly or whether you will continuously need to generate new business through marketing initiatives.

If your business is responding to a temporary, urgent need, you will be more sustainable if you have the capacity to adapt your good or service to changes in the market. You’ll also be more sustainable if you can generate repeat business.

Testing the market

You can do this by:

Exhibiting at relevant trade shows. You’ll not only get an idea of demand, but you can collect customer feedback and use that to amend your product or service for the new market.
Visiting customers in the new market. Find out what prospective customers are looking for in your industry and how you can best help them.
Conducting a trial or pilot by starting small and start trading in the new market. Limit your risk through short-term leases and small production runs, offering only a few products or services. Once demand is proven you can scale up.
Selling online first to test demand before opening locations in the new market.

Testing the market will tell you whether your hunches are correct, and people are willing to pay you for your goods or services. Feedback will give you valuable information on how you can adjust to increase your chances of success.

Planning for the future

Future consumer, economic and societal trends and situations can have significant impacts on businesses of every size, and change can happen quickly. Pay particular attention to any economic, social and industrial trends that could impact your business.

Before breaking into a new market, read local, national, and international news and subscribe to news sources for your industry to get a sense of upcoming trends and historic shifts. Follow thought leaders and experts to deepen your understanding of the business environment.