If you have started your own business and have noticed a steady growth over time, you probably have a few ideas about how to expand your product line. An expanded range of products offer more choices to your customers and also gives you the chance to create a different client base and attract more customers. Ultimately, a more substantial number of products can exponentially increase your profitability. However, you will need to do some market research before diving into creating a new product.
Will the Market Bear the Addition of New Products?
It makes no sense to launch a new product if the market does not support it. You should conduct extensive market research before deciding even to test a product, much less start manufacturing it. Some fundamental questions to ask yourself include the following:
1. What need will this product fill? For example, if you have a coffee shop in an area that already has several other coffee shops, you are probably not going to fill any particular need and expanding may not be a good idea.
2. What does this product offer my customers that they cannot get elsewhere? Again, if you are one of several coffee shops, you need to consider adding something besides coffee to bring in new customers. This could be a new specialty drink only offered by you or could be a service that other shops do not provide.
3. How much additional profit will this product or service generate? If you are thinking solely of increasing your gain, you need to weigh the expense of launching something new against the projected profit. Some ideas sound great until you start putting the costs on paper.
What Kind of Financing Do I Need to Expand my Product Line?
When considering an expansion of your product line, you also need to have a distinct business plan detailing how you are going to market and test the product, as well as how you are are going to pay for the initial start-up costs.
If your current product or service has shown steady growth and is always operating with a profit, you may be able to expand your product line without any outside financing. If not, you may need help finding a small business loan. Before you take on any additional expenses such as loan repayment, you need to be sure your proposed expansion can pay for itself in a short period. Otherwise, you may find yourself over your head and run the risk of losing everything.
Another consideration is your existing staff and management. You need to be sure they can handle an influx of new business as well as help promote the new product or service with enthusiasm. Even if you have an excellent idea to fill a niche, your employees have to be willing to grow along with the company.
For many companies, increasing the number of goods and services is an excellent way to expand their customer base and ultimately increase revenue. If you feel like you need to make some changes by offering something new to your clients, either targeted or existing, you need to be sure to research all of the pros and cons before making a final decision. Even though the most meticulous planning and research in the world will not guarantee success if you increase your product line, you definitely increase the chances if you have done your homework!