Business Expansion: Planning and Implementation Steps (2026)

“Growth and comfort never coexist.” This quote from Ginni Rometty, former CEO of IBM, illustrates the importance of stepping out of your comfort zone in order to grow your business.

Even when it’s uncomfortable, expanding your business is vital to its success. Whether it involves hiring a larger workforce, expanding into new locations, or developing new products, strategic business growth can help you reach new customers and earn more profit.

An increasing number of business owners are ready for revenue growth. In January 2025, Forbes reported that 17% of small business owners said it’s a good time to expand, up from just 4% in 2024. Rising confidence suggests that opportunities are out there and that entrepreneurs who plan thoughtfully can capture them.

So when should you start, and how do you do it without overextending? Here, learn tried-and-true best practices for a smart, sustainable expansion strategy.

What is business expansion?

Business expansion is when a company increases profits and reaches a new audience. It can involve a wide variety of strategies, including acquiring or merging with another company, opening new markets, developing new products or services, or increasing marketing efforts to reach more people. Expansion efforts typically require hiring new employees and forming new departments within the company.

For example, a large corporation could expand its global presence by merging with another corporation or by franchising its brand. Small businesses might expand online by investing in a reliable ecommerce platform and launching new digital marketing campaigns.

Types of business expansion

When assessing types of business growth strategies, it helps to understand the main expansion paths available. 

Here’s a quick look at the most common approaches and how companies can apply them.

Market penetration

• What it is: Growing your share within your current market by selling more of what you already offer. 
• Example: A skin care brand boosts repeat purchases by launching a subscription program.

Market development

• What it is: Reaching new customer segments or expanding to new locations, whether that means entering a new region or launching a localized storefront.
• Example: A Canadian apparel brand expands into the U.S. through localized storefronts.

Product development

• What it is: Creating new products for customers you already serve.
• Example: A coffee roaster adds brewing equipment and accessories to increase average order value.

Diversification

• What it is: Launching new products in new markets to reduce reliance on one revenue stream.
• Example: A home décor brand moves into furniture, targeting a new segment with higher price points.

Mergers and acquisitions (M&A)

• What it is: Buying or joining another business to accelerate growth, gain talent, or expand market share.
• Example: A fast-growing beauty brand acquires a smaller clean-makeup line to broaden its catalog.

Strategic partnerships

• What it is: Collaborating with another company to access new audiences, technology, or capabilities.
• Example: A fitness brand partners with a wellness app to offer co-branded bundles and cross-promote.

Franchising

• What it is: Allowing others to operate locations of your business under your brand.
• Example: A local bakery expands nationally by offering franchise packages with standardized training.

Licensing

• What it is: Letting another business use your brand, design, or IP in exchange for a fee or royalty.
• Example: A children’s brand licenses its characters to a toy manufacturer to reach new retail channels.

Vertical integration

• What it is: Taking control of more steps in your supply chain to improve margins or quality.
• Example: A jewelry brand invests in its own production studio to manage sourcing and reduce costs.

Potential upsides of business expansion

• Grow your total addressable market
• Improve performance across channels
• Achieve economies of scale

Business expansion offers several potential benefits:

Grow your total addressable market 

The primary advantage of expanding your business is the opportunity to reach more customers and increase revenue. If you grow your digital presence by launching a new blog and developing a social media marketing strategy, for example, you can reach new potential customers online. Similarly, you could aim to increase your revenue by addressing different needs for your audience via a new product line.

For example, skin care company Bushbalm initially focused on products for ingrown hair prevention, including oils and scrubs to reduce skin irritation. Within each category, it offers a range of products at different price points, ensuring customers with varying budgets have options.

Over time, it expanded its product line to address other skin care needs, such as dark spot treatment. This expansion strategy has enabled Bushbalm to grow its business significantly.

“We’ve seen massive changes to our business through horizontal and vertical extensions,” Bushbalm CEO David Gaylord told Shopify in an interview. “Upselling a new product in a category has led to growth in average order value. And new lines have helped us reach completely new audiences to target the growing potential total addressable market.”

Improve performance across channels

Expanding into new distribution channels can open new income streams and generate valuable insights you can apply to marketing and sales.

That’s what CEO Brad Charron achieved for protein brand Aloha. When he joined the company in 2017, it was struggling. It had been spending on digital marketing to sell directly to consumers (DTC) online, but not building a loyal audience. So Brad made a big change: he paused its DTC strategy in favor of growing retail. Aloha established retail partnerships with regional grocers and health food marketplaces, including Harris Teeter and Thrive Market.

“I started to build a retail strategy of building with retail partners in regions who would adopt the brand,” Brad explains on Shopify Masters.

The lessons learned from in-store sales translated into other, larger retail partnerships and into the DTC side of the business.

“I could go to that naturally from a position of strength, as opposed to just trying to throw stuff on the wall and see what hits,” Brad says.

Aloha revamped its direct-to-consumer (DTC) strategy by partnering with Shopify to create its new ecommerce platform, ultimately increasing sales by 289%.

Achieve economy of scale

Economies of scale are the cost advantages businesses experience as they increase production to meet rising demand. For example, if you expand your company’s output, you may need to improve your managerial, manufacturing, and storage capacity.

Adding this capacity takes upfront investment, and you may naturally have excess at first. But the idea is to unlock more revenue while keeping your fixed costs the same, reducing your cost per unit, and increasing your profit margin.

Potential downsides of business expansion

• Legal complexity
• Increased financial commitments
• Reputational risk

Business expansion is a significant undertaking that entails risk. Consider the following potential downsides:

Legal complexity

Expanding into new markets often means navigating a complex legal landscape. Taxes, registrations, licensing, and even ecommerce regulations can vary widely by location, so it’s essential to understand the requirements before you launch.

When you enter a new state or country, you may need to obtain a foreign qualification to register your business and operate legally there. Registration typically involves filing paperwork with the state or national authority, appointing a registered agent, and maintaining annual reports. Without a foreign qualification, you may face penalties and barriers to enforcing contracts in that jurisdiction.

Some industries also require state-level licensing, especially if you sell regulated goods such as cosmetics, supplements, children’s products, or anything that falls under food and beverage laws. Requirements often include safety documentation, local inspections, or specialized labeling rules. 

For example, a skin care brand expanding into California may need to meet stricter ingredient disclosure requirements, such as those under Prop 65 and the California Safe Cosmetics Program.

Taxes become more complicated as well. Selling in new states can create a sales tax nexus—a legal connection that requires you to collect and remit sales tax. 

Nexus can be triggered by:

• Economic activity. Such as reaching a revenue or transaction threshold in a state.
• Physical presence. Including employees, contractors, or an office.
• Inventory stored in warehouses. Including third-party logistics centers (like Amazon FBA).
• Temporary presence. Selling at a pop-up or trade show, for example.

International expansion adds to the risks involved and requires careful planning. If you take your business abroad, you’ll need to follow the local rules around commerce, consumer protection, and digital practices.

• Data privacy (EU GDPR). Businesses must obtain clear consent for non-essential cookies and other tracking, respect user data deletion requests, and comply with rules on customer data storage, among other requirements. 
• Product standards (EU cosmetics and consumer goods). Product-based businesses may need to meet requirements for ingredient documentation, safety testing, product notifications, and packaging, among others, and designate a “responsible person” located in the EU.
• Cross-border taxes. Many regions require VAT/GST registration once you hit a certain revenue threshold, even if you don’t have a physical presence.

Because requirements vary widely across markets, many merchants work with legal counsel, cross-border tax specialists, or compliance consultants to ensure they meet the rules of each new location before expanding.

Increased financial commitments

There are also financial risks to consider when expanding your company. For example, growing your online presence through paid ads or influencer marketing requires financial resources. 

Similarly, launching a new product line takes significant investment in market research, product development, prototyping, and manufacturing. These costs could sap your working capital, require you to take on debt (via a loan), or force you to give up equity (to investors), adding liabilities.

Reputational risk

There are reputational risks to consider when expanding your business, too. For example, if you increase your dropshipping business by partnering with new suppliers, you’ll need to vet those partners to ensure consistent quality. To avoid hurting your brand reputation, examine the customer experience implications of any business expansion strategy.

When to expand your business: key considerations

Before investing in new products, markets, or locations, check that your business is truly ready. A clear assessment of your financial health, operations, and market conditions can help you expand with confidence.

Financial readiness

Strong finances provide the foundation for sustainable expansion. 

Look for indicators like:

• Healthy cash flow. To provide the flexibility to weather slower months or upfront investment costs.
• Capital reserves. To fund new hires, inventory, marketing, or equipment.
• Manageable debt levels. So expansion doesn’t strain repayment obligations.
• Funding access. Whether through business loans, investors, or revolving credit.
• Reliable financial forecasts. To show steady revenue, profitability, or demand trends.

Operational readiness

Your internal infrastructure should support growth without compromising quality or customer experience. 

Operational readiness becomes even more important when opening a second location for your business, as you’ll need scalable processes, reliable suppliers, and consistent product quality.

Key signals include:

• Scalable processes. From fulfillment and support to inventory management.
• Team capacity. Your staff can handle increased volume, or you’re ready to hire.
• Robust tech stack. Including ecommerce, point-of-sale, and automation tools that can scale with demand.
• Consistent product quality. Even as production or order volume increases.
• Strong supplier relationships. With partners who can meet higher order quantities or new product requirements.

Market readiness

Expansion makes the most sense when market conditions support it. 

Consider whether you have:

• Proven demand. Such as consistent sales growth, waitlists, or repeat purchases.
• Favorable market conditions. Including rising consumer interest or positive economic indicators.
• A clear competitive position. You can offer a differentiated product or experience that will stand out in a new market.

Taken together, these factors offer a grounded view of whether now is the right time to expand—and where you may need to strengthen your growth strategy before taking the next step.

When to delay expansion

Sometimes the best growth move is to pause. Expanding too early can strain your finances, overwhelm your team, and weaken your customer experience. 

Consider delaying expansion if you’re seeing signs like:

• Inconsistent revenue or declining sales. These make it harder to fund new markets or products sustainably.
• High customer churn. This can force you to spend heavily on acquisition just to maintain your current revenue.
• Operational challenges. Frequent stockouts, supplier issues, or fulfillment delays could worsen as volume increases.
• Leadership capacity gaps. This occurs when the team lacks the time, structure, or experience to manage the added complexity of expansion.
• Unclear differentiation. If your brand’s value proposition isn’t strong enough to compete in a bigger or more competitive market.

How to develop a business expansion strategy

1. Zero in on the opportunity
2. Revisit your brand positioning
3. Create a plan
4. Get the right tools in place
5. Develop your go-to-market plan

Here are some practical tips for strategic market expansion:

1. Zero in on the opportunity

Successful expansion starts with a clear understanding of the market you want to enter. That means sizing the opportunity, knowing your customers, and understanding your competitors.

What to research

Focus on data that helps you validate demand and spot gaps:

• Customer demographics and behavior. Who they are, how they shop, and what problems they’re trying to solve.
• Competitor positioning. Key players, their pricing, messaging, and customer reviews.
• Market size and growth. Total addressable market, spending trends, and seasonality.

How to research based on expansion type

To make informed decisions, you’ll need tailored data, which will vary by expansion type:

• New product categories. Look at adjacent products your customers already buy and test interest with small pilots or surveys.
• New geographic markets. Research local buying habits, shipping expectations, payment methods, and regulations.
• New customer segments. Use targeted ads or email tests to see if your messaging resonates.

Tools that help

Merchants often rely on these tools to assess new business opportunities:

• Shopify Analytics. For customer and product insights.
• Shopify Markets. To compare performance across markets or experiment with new business models.
• Google Trends (and other keyword tools). For demand signals.
• TikTok or Meta test ads. To validate new audiences.
• Survey tools. Like Typeform, for direct customer feedback.
• Competitive tools. Like Similarweb or Semrush, for assessing competitor approach.

A focused understanding helps you enter new markets with confidence and create a plan to differentiate your brand from incumbents.

2. Revisit your brand positioning

Expansion may require you to broaden your positioning, especially if you’re launching new products. Bushbalm, for example, had to revise its mission to support its growth, expanding its focus on pubic care to a broad array of skin care challenges.

“Our tagline now is ‘Skincare, Everywhere’ and our mission to solve skin challenges, no matter how niche they sound,” David explains.

The new mission enabled the brand to expand its treatment offerings to include eczema, psoriasis, hyperpigmentation, sun damage, and other skin irritations.

When planning your own expansion, make sure you have clear brand messaging to help your customers understand your new products or your new reach.

3. Create a plan

Once you’ve validated the opportunity, formalize your expansion with precise strategic and financial planning documentation. Outline what you want to achieve, the resources required, and how you’ll measure success.

Set clear goals

Define what growth looks like in measurable terms, for example:

• Increase customer base by 15% to 20%.
• Capture 5% of a new market within a year.
• Grow revenue by 30% through a new product line.

Plan your resources

Map out what you can invest today and what you need to secure for long-term success. 

Your documentation should include:

• Budgets. For inventory, marketing, staffing, and technology, and an emergency fund (typically three to six months of operating costs).
• A simple financial model. To forecast revenue and expenses.
• Funding sources. Include loans, lines of credit, or investor support.

Example: If launching in a new region, model a best-case and a conservative sales scenario to understand your break-even point.

Create a timeline

Outline when key steps will happen, including: 

• Hiring
• Product development
• Supplier onboarding
• Marketing
• Launch 

A clear schedule keeps teams aligned.

Choose KPIs to track

Select the KPI metrics that will guide decisions during expansion, such as customer acquisition cost (CAC), inventory turnover, or repeat purchase rate.

Example:Set a CAC threshold (e.g., no more than 20% to 25% of first-order revenue) to maintain profitability.

Include financial documentation

Support your plan with updated cash flow statements, balance sheets, sales forecasts, and market research.

4. Get the right tools in place

Expansion and growth can create operational challenges for your business, so ensure that you have the right tools to support this new undertaking. Evaluate your current tech stack to ensure it can scale as you expand. Specifically look at:

• Financial software. If you’re expanding internationally, does your payment processor and accounting software handle transactions in foreign currencies? Can your accounting software handle an increase in transaction records or invoicing needs?
• CRM. If you’re increasing your marketing efforts, can your customer relationship management system (CRM) handle more leads? Are you collecting the right customer data to make your marketing smarter as you grow?
• Website and ecommerce platform. If traffic to your website dramatically increases, is your site ready? Can your online store handle a major uptick in orders?

5. Develop your go-to-market plan

Launching a new product or entering a new market calls for a focused marketing plan—almost like a mini relaunch for your brand. It’s your chance to introduce your message to new audiences or deepen it with existing customers.

A strong go-to-market plan should clearly define who you’re targeting and how you’ll reach them. Start with a tight target audience definition: their needs, shopping behaviors, preferred channels, and what motivates them to buy. From there, build a messaging framework that outlines your value proposition, key product benefits, and the proof points that matter most to this audience.

If you’re expanding into new regions, take a localized approach. Tailor your copy, imagery, offers, and channels to reflect the culture and expectations of that market. Gather real input through surveys, interviews, or small focus groups to validate what resonates before launch.

Your marketing plan should also outline:

• Channels. Paid ads, email, influencers, SEO, retail.
• Campaign concepts. Also covercreative direction.
• Budget allocation. Resource allocation by department or initiative.
• Launch timeline. Including major milestones.
• KPIs. Key performance indicators such asCAC,email signups, or early repeat purchase rates.

Putting these insights into a single plan keeps everyone on the same page about your launch strategy and how you’ll create early momentum.