Growing Your Business: Costs and Considerations of Business Expansion

by Ben Dwyer

Most businesses consider expanding at some point. Whether you’ve saturated your current market, want to widen your appeal, or you have great ideas for new products, there are always new opportunities elsewhere.

Of course, alongside opportunities there’s also risk. It’s important to manage that risk carefully and stay in control of any potential issues as you’re expanding.

One of the biggest risks for expanding your business is the cost of entering a new market, and whether you can justify that cost by bringing in enough revenue. Before you plan your next expansion, take a careful look at the main cost drivers and build a strong business case that compares your costs against potential profits.

Whether you’re breaking into a new industry, sector, country, or customer audience, here are the main considerations for business expansion.

Market Research

Market research is the foundation for possible expansion. Before you expand into a new area, you’ll need to establish that there’s an audience and customers for your products or services. That means in-depth market research on the appetite for new products and services. You’ll need to look into competitors, likely customer segmentation, best routes for marketing, what people need from your products and services, and much more.

Approach market research with an open mind and be willing to adapt your strategies if necessary. If the research indicates that this particular location or product isn’t likely to pan out, don’t force it through anyway. This is the phase where you can make an informed decision on the path with the highest chance for success.

Analytics tools, like Main Street Insights, can give insight into competitors and the viability of given locations.

Product Development

For some types of business growth, it’s likely you’ll need to make significant changes to your products and services, or design new ones from scratch. If you’re expanding into a new country, you’ll have to localize your business offerings.

Different industries and sectors have widely varying needs. This means bringing in product development teams, project managers, local experts, and more to help you develop truly useful products. Remember, just because your product sells well in one region or to one demographic doesn’t automatically mean that will transfer nationally or internationally. Be sure you’re selling what your customers are actually looking for.

Rules, Regulations, and Compliance

There are ways of doing business in new markets, and those are often controlled by precedent, compliance, regulations, and legalities. You’ll need to carefully follow these rules so you don’t run afoul of any government agencies or other legal bodies. You may need to take on local attorneys or compliance experts to ensure you’re conducting business in the right way.

Establish a good relationship with your own business attorney. They may be able to point you in the right direction or recommend the right people if you have questions on legalities and compliance outside of their expertise.

Hiring New Staff

In addition to your product development staff, you’ll likely also need to bring in other new hires or consider automating administrative tasks. You’ll need trained customer service agents for the new market, together with other support and management staff. You may need to take on new sales and onboarding employees who can promote your products and get them up and running. If you’re distributing products, you’ll need to set up new logistics and distribution arrangements.

Related Article: Customer service costing too much? Here’s how to fix it.

Promotions, Marketing, and Advertising

Breaking into a new market can be difficult, so you’ll need excellent marketing. These days, marketing teams are more important than ever for generating leads and helping your team close sales.

A healthy marketing budget for advertising and other promotions will be essential. You’ll need to establish the best channels for reaching your potential customers and closely track marketing return on investment.


It’s vital to get your pricing right. You’ll need an excellent understanding of all your business, support, and product costs so you can set your prices accurately. You’ll need to consider your competitors’ pricing models too, so you can offer value at an acceptable rate. Finally, be sure to consider the new location. Pricing for the same product in New York and Missouri could be much different.

Exchange Rates

If you’re breaking into a new country, take into account exchange rates, tariffs, and other duties for selling your goods. It’s also important to consider how you’ll accept payments if you’re based in one country but selling in another, as that’s very common for ecommerce/online selling. Some credit card processors have convenient international transaction methods, but you may end up paying more. Be sure you understand how exchange rates and other fees will affect your bottom line.


Make sure you understand your business tax liability for selling certain types of products or in different countries. You’ll need to build any tax calculations into your overall profit model. It’s worth consulting with a tax professional to understand what effect your business growth will have on your tax liability.

Related Article: Don’t Lose Money on Processing Fees Paid on Sales Tax.

Optimize Expenses

When you’re considering expanding, it’s a good idea to take some time and make sure you’ve already optimized your expenses. Business growth costs can add up, and having a sound financial strategy can make things easier.

One service that many businesses overpay for is credit card processing. If you have a processor that charges “qualified” and “non-qualified” rates* or if you’re on a flat rate model, you may be overpaying. Consider utilizing a credit card processing comparison tool to see real-time pricing for your business from multiple processors with no obligation.

*Note that Visa has begun using the term “non-qualified” rates for some of its downgrade categories, so this no longer automatically implies you’re on tiered pricing. However, if you see “non-qualified” or any variation of those words on your processing statement, it’s worth looking into further, as that indicates you are potentially overpaying for processing.

Take all of these factors into account when deciding whether to expand. Once you have a good idea of all the costs, you can look at your price points, expected turnover, and revenue and see how long it will take you to recoup your investment and make a profit. The Resources section, below, provides links to helpful tools and articles.


Calculating Margin: Determine Your Profit
Beginners’ Guide to Profit and Loss Sheets (P&Ls)
Save Money on Credit Card Processing

1 thought on “Growing Your Business: Costs and Considerations of Business Expansion”

  1. The most successful businesses either fix problems (either real or perceived), or they increase your customer’s pleasure. They create a repeat need for a product or service among the target market.

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