Expanding your business across state lines? Start here

Despite borders being closed, it’s possible to grow your business beyond state lines. But, it’s a process that should be approached methodically.

It’s not just travel plans being called off in 2020 — the closure of international borders has also made expanding a business much more difficult than at any other time in recent years.

For business owners lucky enough to have maintained growth this year, focusing on interstate expansion may be the more viable alternative.

Developing a state-by-state expansion strategy could be a great way to build your customer base and increase sales and brand awareness.

Below are the questions you’ll need to answer before taking the leap.

Are you set up for scale?

Firstly, you’ll want to be confident that your business model is scalable.

Your venture may be pumping along well now, but how will things work once you have another office, new machinery or possibly a geographically remote workforce?

For instance, will you be able to meet the extra demand with your current staff numbers, or will you need to hire more people? Does your leadership team have capacity to deal with a multi-state organisation, or are you going to find your management ability stretched beyond its limit?

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Also, determine if you need additional technological capabilities to handle the extra workload, as well as the marketing strategy and budget you’ll need to establish your brand in its new territory.

Scalability means you can add customers quickly and service them appropriately, all while not having to add so many resources that your profit margin becomes negligible.

Before you expand across state lines, run the numbers, work out what you require to scale, and decide whether the return on investment will be worth it.

Are there any legal complications?

Setting up in another state in your own country is more straightforward than expanding internationally. But don’t assume there won’t be any differences between the areas.

Research state laws and other regulations that might affect your operations when expanding into a new area, plus the paperwork you need to complete for compliance.

For example, you will likely need to note your additional trading location with ASIC.

There may also be differences in factors such as:

• Workplace health and safety rules
• Trading hour regulations
• Property sale and lease laws, including taxes and duties
• Human resources factors, like hiring regulations and payroll tax rates
• The licenses required to conduct work
• Permits around running marketing campaigns, such as competitions, raffles, giveaways and so on

Look into these things so you can tell, ASAP, if the different regulations will make the cost of doing business in the new state prohibitive.

Have you picked the best place?

Don’t expand interstate until you’re sure the area you want to target next has a market large enough to support your plans for growth.

Conduct market research to determine your potential target market’s size and if customers browse and buy in similar ways to what you’re used to.

Test things out before you commit, since there can be noticeable socio-economic and cultural differences from place to place.

You could set up a pop-up store, or sell your wares at a popular market stall for a time, for instance, or run a month-long advertising campaign as a trial to ensure there’s enough demand.

Discover how much competition you might be up against, too, and if the area is growing or shrinking – be sure there’ll be future opportunities for continual growth.

Learn about the cost of buying or leasing premises, if relevant, and see if the location you’re thinking of is practical in terms of technology, transport, and having nearby suppliers or distributors.

Have you chosen the right model for expansion?

Another critical factor is determining the best model for interstate growth.

Will you set up your own additional office in the new locality and hire staff interstate, so you have control over how the brand is developed there?

Or are you more interested in using licensed contractors who already know the area well?

Perhaps, alternatively, you think it will be less stressful and more profitable to franchise your business model?

Each structure has pros and cons, so look into them all to see what might be the best solution for your needs.

The financial side of things is vital, but keep in mind your long-term lifestyle goals and how much time you’ll have to commit to growing the business, too.

Have you done your due diligence?

Don’t be shy about reaching out to others for local assistance.

Chat to state government offices, local councils, and chambers of commerce to get the answers to your questions.

Some organisations might offer one-on-one assistance for new entrepreneurs or even grants to help you set up within their area.

Also, chat with entrepreneurs in similar fields who’re already set up in the state.

They should be able to give you an idea of the main risks to be aware of and help you out with dos and don’ts when targeting the local market.

There might be local business groups and associations you can join to get clued up on the way things work in the state, too.

Moving into a new market is exciting and brings with it many great opportunities for a big payoff. But, this growth also has potential downsides.

Unexpected consequences could negatively impact your business if you’re not careful, so plan ahead and think strategically to improve your chances of success.

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