Cliff Farrah - Growing the Top Line

Geographic expansion in the corporate world is high‐stakes poker, and that makes this question the number‐two concern on the list to consider.

However, larger businesses of scale have a tremendous advantage leveraging their existing geographic footprint. If you’ve already worked through the hurdles that John raised, then that is a huge competitive advantage. Doug Fletcher talked a bit more about this very point:

It’s so much easier to hunt in an existing geography for professional services than it is in a new geography. And maybe it’s true with products, too, but it’s especially true in a service business because services are such relationship sales and people naturally trust people [who] are from their area more than people from faraway places. Example: If I’m from New York and I want to sell in Mobile, Alabama, that’s going to be a hard sell, right? But if you’re in New York and you’re trying to expand into Connecticut or New Jersey, that’s an easier sale. New geography is hard in the services business because you have no established brand reputation and you have no established relationship base; you’re looking at a multiyear proposition before you can expect any sort of traction.

Michael Woodfolk, President of the Darden School Foundation, and I spoke a bit about their recent expansion to the DC Metro area. Michael is smart, effective, kind, and polished. He’s the friend you wish you had more of in your life. Michael has an incredibly challenging role as the head of a 501(c)(3) that is the funding engine of UVA’s Darden School. He’s led this organization for the past 5 years, although he’s been at the school for over 20 and is a fellow graduate. He illustrated how through its recent geographic expansion the school has been able to drive growth, not just by accessing new students, but by better engagement with alumni:

We had to innovate. Our innovation was to launch the executive MBA at our new UVA Darden Sands Family Grounds, our DC Metro facility in Washington, which is very different than Charlottesville, Virginia, . . . We launched an executive MBA there and since our largest alumni base sits within Washington, DC, all of a sudden Darden becomes more real to alumni. You’re all busy, we just have to make sure we figure out a way to be relevant to you and part of being relevant is being seen. That big sign that used to say USA TODAY on a huge building in Arlington, VA, now says UVA Darden School . . . so it’s not just Charlottesville anymore. It’s now Washington, DC. It’s not just the traditional MBA, it’s the executive, and we’re already thinking about, what’s next? The night MBA? We have the marketplace to do that now.

Michael showed a success story for expansion, but as a rule, existing geographies are the low‐risk route. Site location, build‐out cost, staffing challenges, maintenance, and operations can be significant unknowns. More concerning is the potential for the geography’s ability to sustain the revenues necessary for the investment to access that market physically. New geographies offer access to new customer pools, and a non‐core test environment for new products/business model testing.

1 1.Charlie Osborne, “Google Slams on the Brakes for Office Return, Mulls ‘Flexible Work Week,’” ZD Net, December 14, 2020, https://www.zdnet.com/article/google-slams-on-the-brakes-for-office-return-mulls-flexible-work-week/.

2 2.Jerry Useem, “When Working from Home Doesn’t Work,” The Atlantic, November 2017, https://www.theatlantic.com/magazine/archive/2017/11/when-working-from-home-doesnt-work/540660/.

3 3.Christian Stadler, Michael Mayer, and Julia Hautz, “Few Companies Actually Succeed at Going Global,” Harvard Business Review, June 2015, https://hbr.org/2015/03/few-companies-actually-succeed-at-going-global.

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