How Small Business Owners Can Define the Area Their Business Serves

by / Friday, 09 May 2014 / Published in Retail Business Financing

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As a small business grows, a lot of questions are created that don’t always  have clear black and white answers. One of these questions is whether or not the business is able to work with clients outside of a certain area. While it is tempting to define a limit and then exclude any clients that fall outside of it, if the business is lucrative enough then it could have you reconsidering the boundaries that you have set.

Why define a range for your small business to work within? It’s usual for businesses to serve customers only within an area that will allow them to create profit when transportation and other logistical costs are added up. But a boundary can also be defined for other reasons. Even if there is potential profit to be made outside of a local area or in other states, small business owners in the process of growing may find that they lack the infrastructure required to manage clients from distant parts of the country. Avoiding the issues that can arise from either overextending your business boundaries or underestimating the range you can handle

In order to get a sense of how much area you can handle, turn to market research. The only real way to anticipate the potential volume associated with serving a larger or smaller area is understanding how many clients lie within it and the market share you can anticipate. Trying to expand the bounds of your business without doing any market research is dangerous. You may wind up not creating any new business from expanding your borders without expanding your marketing, or you may find a higher than anticipated demand which can create congestion that leads to poor customer service. The last thing that a business owner wants to happen is to extend the bounds of their business and then immediately become known within their new area as inefficient.

For the outer boundaries of your range, you may have to create separate shipping options. If you are willing to serve clients outside of a local range, you should account for the costs of working with them. You may have to create more shipping options that can cover the added costs, or set an order limit to ensure that the business you are doing remains profitable to you. If you have determined that a market exists for your products outside of the range you are able to handle, you might consider approaching businesses in that area in order to see if there is interest in them ordering your products wholesale from you for retail. All in all, the costs of doing business will define your turf, so to speak. It’s important that you really know what those costs are, and how much potential profit is out there to be made to offset them.

Photo Credit to Kevin Hutchinson on Flickr

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