If you feel like you've captured as much of the local market
as you can, it may be time to move on. But before you leap into an
out-of-state market, have a thorough plan in place.
"We don't go into a market unless we're committed
to dominate that market," says Michael Glauser, president and
CEO of Golden Swirl Management Co., a Salt Lake City company that
operates more than 80 frozen yogurt retail shops in the Western
United States and has a thriving wholesale division as well.
Glauser saw similar companies taking a shotgun approach to
nationwide expansion and decided on a more focused method. To see
the wisdom of his decision, just look at the numbers: The last 70
Golden Swirl stores were funded by operating capital and required
no debt or equity financing.
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"Our objective is to go into cities of 1 million to 2
million people, build a region of stores as quickly as we can, and
not jump around," Glauser explains. By putting a large number
of units in a particular area quickly, Golden Swirl is able to
capitalize on economies of scale in distribution, management and
marketing.
Before launching an expansion plan, Glauser advises, take a look
within. "Seriously look at your reason for expansion," he
says. "You typically have to grow to satisfy your employees,
to offer them career opportunities, to have cash for research and
development and those kinds of things." But, he cautions, you
may not see a significant increase in your net earnings-in fact,
during a strong push for expansion, your personal income may even
decrease. "So know what your objective is, and be sure
expansion is the way to make that happen."
Once you've made the decision, choose your market carefully.
Consider distribution issues-how you will get raw materials and
products to your new location, and how the cost of transportation
will affect your service and pricing levels. Don't skimp on
market research; you have to know the market you're going into
as well as the one you're already in.
Consider who will be in charge of the new site. "Those who
run that operation for you in the new area have to be as committed,
hard-working and enthusiastic as you are," Glauser says.
"They have to duplicate what you're doing in your present
market. That means either you're in the new location a lot, or
you bring in a partner, or you offer sufficient incentives for
someone to behave like an owner in that new market. If you hire
without creating that feeling of ownership, your operations will
deteriorate dramatically as you move out of your state."
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