Ready for Growth? Here are Business Growth Strategies You Shouldn’t Overlook
Business growth is an exciting part of every entrepreneurial journey. What that growth actually looks like is different for different businesses. It could be in service or product expansion, store openings, increase in customers or sales, or merging with another business. Whatever it looks like for you and your company, you’ll need a clear roadmap to navigate the various changes it will bring.
With these changes come challenges and risks that you’ll need to make sure your company is ready to take on. In this article, we breakdown the questions business owners should ask themselves to determine if they are ready for growth and the different growth strategies they can implement if and when the time is right.
Signs Your Company is Ready for Growth
Whether or not your business is ready for growth depends on a lot of factors. Staff, cash flow, demand, customers, among others, all play a crucial role in determining if your company can take on any form of expansion.
Here are four questions you should ask yourself to see if your enterprise is ready for growth:
1. Do You Have the Right Employees?
Managing growth isn’t simply about the number of employees in your company. It requires you to evaluate if these employees have the right skills and work ethic to help take your company to the next level. As the business grows, so will their workload. Are they ready and eager to take on more responsibility? Growth also brings on unforeseen challenges. Are they solution-oriented and able to pivot and adapt when plans or circumstances change?
2. Are Your Order Volumes Significantly Higher than Before?
As you track your sales from month to month, are you seeing steady and continued growth over the course of the year? Over the course of multiple years? Temporary increases, like sales spikes during the holiday season or a special event, are not a strong indicator of growth. But if sales are climbing consistently throughout the year, across multiple years, this reflects a growing demand for your product or service.
3. Do You Have the Financial Resources for Growth?
Growing means you’ll eventually need to expand operations. To do so, you may need to purchase additional equipment, renovate, or build another location, add more people to the payroll, or increase your inventory. All of these business initiatives require cash. Evaluate your company’s needs and then examine your budget to see if you have the financial resources to support them. If the answer is no, you may want to wait until your cash flow is stronger.
If you’re planning to apply for financing to support growth, the question to ask is whether or not you and your business are qualified for long-term business financing. Do you have collateral to offer? What does your credit history look like? A good borrowing history will allow you to apply for long-term financing from banks or alternative lending institutions. If yours is not strong at the moment, consider holding off to improve your credit background, so you have a better chance to qualify for loans with better terms in the future.
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There are many funding options available for small businesses that will help support the growth of their company. Whichever one you choose, be sure you secure the cash you need before implementing your growth strategy. If you jump into the plans you’ve laid out without the proper financing to support them, you likely won’t be able to deliver your promises to your customers. This could lead them to abandon your brand for a competitor who can.
4. Are Your Customers Constantly Seeking You Out?
Listen to your customers. Are they loyal to the brand? Do they continue to seek out your products or services in the market? Are they requesting more product variety, more store locations, expanded services, etc.? Are some of them traveling from afar to get to your store and purchase your products? These are all indicators that it might be time for you to grow.
Creating Your Business Growth Strategy
If you’ve asked yourself the above questions and evaluated that yes, your business is ready for growth, your first step should be to create a business growth strategy. This is a document that outlines your business goals –long-term and short-term – detailing how you plan to reach them and the timeframe for doing so. Essentially, it’s your blueprint for growth.
This should be a living and breathing document that can easily be revisited and modified as needed. Running a business requires a lot of trial and error. As you execute your growth strategy, you may hit some roadblocks or learn that certain parts of the strategy aren’t working. Be sure to reflect these changes in your plan to avoid making similar mistakes down the line. The same goes for ideas and parts of the strategy that work really well. Make a note of these as efforts to try and replicate in the future.
6 Business Growth Strategies Entrepreneurs Can’t Afford to Overlook
As you create your business growth strategies, here are six concepts to be aware of:
Diversification is one of the most effective growth strategies that a lot of businesses embrace. It involves bringing new products into your existing market or entering a new market or industry where your business does not currently operate to reach new customers. This strategy aims to generate new revenue streams to achieve greater profitability and maintain stable growth.
Diversification comes in different forms:
- Horizontal Diversification. When a company adds new products or services that are unrelated to the ones they currently offer and sells them in its’ existing market, to appeal to its current customers.
- Concentric Diversification. When a company adds products and services related to the ones they currently offer and sells them in a new (but similar) market, to attract new customers.
- Vertical Diversification. Also known as vertical integration, vertical diversification occurs when a company integrates some of the production processes into their company, instead of outsourcing it. For instance, retailers may choose to expand, bringing the manufacturing process of the products “in house.”
- Conglomerate Diversification. When a company diversifies into completely new products, services, or markets that do not relate to the current business.
While diversification may be an ideal growth strategy for businesses, it’s important to note that it is also the riskiest. When you introduce a new product or service to customers, there is no certainty as to how it will be received. It could appeal to your target audience, but it may not, in which case it’s a costly failure. Additionally, if you’re entering a new market with which you’re not familiar, that poses risks as well.
2. Product Development
Think about car companies or technology companies like Apple. Every year they are releasing new and improved versions of the products they provide. This is a great way to maintain excitement around your business year after year. Product development – whether it’s creating something completely new or continuously improving upon something great – encourages loyalty among existing customers and creates opportunities to attract new ones.
With innovation, there is always a risk that the market won’t respond to it. Minimize your risk by doing your market research. Create prototypes, test the response, and adjust your product according to the feedback you get from your customers before moving forward with production.
3. Market Penetration Strategy
Market penetration is a growth strategy wherein a business attempts to grow by selling an existing product in a market where a similar product is already established. Essentially, you’re able to target an audience that you already know has an appetite for the type of product you’re selling. This is a particularly good strategy for start-ups that are still establishing their brand.
Market penetration requires you to study your competitors’ products and how they’re performing in the market you’re looking to penetrate. From there, you can make adjustments to your products or services, offer them at a lower price, and give your company a competitive edge. In market penetration, the focus is on promoting your products to customers so you can increase sales.
If you manage to prove your product is better than your competitor’s, there’s a good chance you’ll absorb a portion of those customers, allowing you to grow your market share over time.
4. Market Development
Unlike the marketing penetration strategy where you sell existing products to existing markets, with this strategy, businesses introduce existing products to new markets. There are two ways to go about market development: suggesting new uses for your existing product or expanding your product’s geographical reach.
Suggesting new uses for an existing product: Survey your customers to find out how they are using your product. You may learn there are some innovative uses you hadn’t even thought of. Use these insights to market the most interesting and effective uses to other markets to reach new customers.
Geographical expansion: Through this strategy, you’re selling your products to locations that you haven’t tapped into yet – be it new national destinations or foreign countries. If you’re planning to expand internationally, it’s essential to consider each country’s regulations and culture where you’d like to sell. Consider partnering with local entrepreneurs in those countries to offer them franchise options as they know the landscape, the local customers, speak the language, etc. This would mitigate a lot of the risk present if you were to open the physical location yourself. You can also tap into e-commerce platforms to reach international customers.
5. Business Acquisitions or Mergers
Business acquisition is the process where a stronger company takes over a weaker entity by buying the entire or most of the weaker company’s share. The buying party gains most of the weaker business’ operations and merge their operations with the business they acquired. This is a good business growth strategy if you’re looking to expand, but are having financial problems or facing stronger competition. By letting stronger companies buy your business, you will give your business and constituents a chance to thrive and continue growing.
If you’re the stronger company in this situation, acquiring another business helps you increase your market shares. You’ll also benefit from the established clientele and operations. If you’re planning on expanding to a new geographical location, mergers and acquisitions can help you establish your business successfully.
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6. Market Segmentation
Market segmentation is one of the most effective business growth strategies. Simply put, this allows you to aggregate your target audience to different groups or segments. It will enable companies to identify target audiences that share similar preferences, interest, or location and tailor their marketing campaigns in a way that would be attractive to these segments. Typically, companies use these three criteria in market segmentation:
- Homogeneity refers to the common needs of a specific segment.
- Reaction, or the audience’s response to the product or market.
- Distinction or the uniqueness of the market to other groups.
For instance, a sportswear company may have different market segments for swimmers and marathon runners. The type of advertisement they will conduct will gain a different response from the two groups. With market segmentation, the company can create a targeted marketing campaign that will attract their segments (swimmers or marathon runners) into buying their brand.
Companies can also segment their market in different ways according to the following variables:
- Geographical area
- Psychological response (lifestyle, social class, or personality)
- Behavioral benefit or use
- Demographics (age, size, income)
Business Growth Strategies: Final Thoughts
Your business needs to grow to survive. Without proper business growth strategies in place, there’s a chance you won’t be prepared to handle the changes growth can bring. Planning your strategy will take a significant amount of time and effort, but it will pay off in the long run when you start seeing the positive results in your business.
Be on the lookout for the signs that your company is ready for growth. Make sure that your company has the resources needed to support the expansion. Once you’re confident, the growth strategies mentioned above will come in handy for your small business’s successful growth and development.