Daniel Roessler
Establishing realistic growth expectations and determining how to achieve your growth targets are common challenges for many small businesses. There is a natural tendency to want to expand your business at the maximum pace the market will allow. This only works if the business infrastructure is in place to support high growth rates. However, many small businesses must carefully manage growth in order to build necessary business infrastructure in parallel. Growth that outpaces what your business infrastructure can handle may actually damage your brand and negatively impact your long-term business prospects.
Growth projections based on validated assumptions and a firm foundation are a critical part of your business planning process. Whether through formal market analysis or a less formal process based on general market information, it is important to establish and document the assumptions that serve as the foundation of your growth plan. You should also consider your estimated growth curve trajectory as a key factor in forecasting revenue and spending. Once you have established your growth expectations then you must develop a strategy that will enable you to best achieve your planned growth objectives.
Seven common growth strategies are listed below with some additional details in the following paragraphs.
- Expand Sales and Marketing Efforts
Enhance or Add Features to Existing Products or Services
Introduce New Products or Services
Target New Geographical Markets
Target New Vertical Markets
Build and Leverage Partnerships
Mergers and Acquisitions
Expanding sales and marketing efforts can involve a wide variety of tactics such as focused campaigns, shifting of funds among marketing categories, new initiatives or additional resources. For instance, if your business is relatively new, focused campaigns using newsletters, emails, social media and advertising might help drive awareness and build credibility with new prospects.
For more established businesses, marketing budgets normally encompass a number of marketing categories. Shifting funds and resources between these categories for specific purposes can at times be a valuable tactic. For example, if your sales pipeline has dwindled you may shift spending to lead generation marketing activities as opposed to market research until you have rebuilt your pipeline. Good sales and marketing metrics must be in place to enable recognition of when these types of adjustments should be made.
If you manufacture a product or provide a service you might explore growing market share through enhancements or additional features within your products or services. Thorough market research is the first step required for this strategy to prevent investment without adequate return. Small businesses can sometimes minimize this step because the new feature or service is technically a good idea. However, great technical ideas that cost too much money, take too long to build, do not capture market share or delay return-on-investment can be bad business decisions.
Introducing new products or services can be a plausible growth strategy as well. The best scenario for using this strategy is when you have an established customer base to buy your new solutions. If you can sell new solutions to your existing customers, it will minimize increases in the sales and marketing budget associated with introducing new solutions and can shorten your time to realize a return-on-investment.
Targeting new geographic markets can generate growth and offers the flexibility to be implemented in a variety of ways. Geographic expansion outside of current territories for many types of small businesses is easier than ever because online opportunities offer instant access to larger territories. For some businesses that are physical establishments, locally based (e.g. restaurants) this may not be a practical growth strategy. Another frequently used geographic growth tactic, especially for B2B companies, is to open sales offices in new geographies and then slowly build a local geographical presence as your customer base develops. Geographic growth should always be constrained to territories that your business can adequately support.
Another growth strategy is selling solutions into new vertical markets. For example, if your business is an engineering services company that has focused on the oil and gas industry customer base, maybe you want to offer similar services in the pharmaceutical industry. The decision to grow into new industry markets should not be done haphazardly. Market research and analysis which identifies the market requirements and investment obligations is critical. You should also be aware of how growth into new markets can impact branding, especially if you have established your reputation in a niche market.
Partnerships can be another appealing growth strategy because they typically require minimal investment and limited risks. Leveraging the reputation and customer base of partner or distributor companies can quickly raise market awareness of your solutions and greatly expand your prospect pool. Selecting quality partners is essential because your brand will be linked with their business. Investing time in the relationship and creating a win-win situation will ultimately determine the success of the partnership.
Whether you are on the purchasing or selling end of a transaction, mergers and acquisitions can also potentially be part of your growth strategy. If you merge with or acquire another company it can result in an instantaneous step increase in your business. You must be prepared for the potential HR, financial and infrastructure challenges that can come with this approach. While many small business owners dread the idea of giving up control there are even times when selling your company is the best growth plan to overcome existing constraints.
Many factors determine which of these growth strategies best fit your specific needs including: the type of business, established reputation of the business, potential market share, investment capital availability, growth rate targets, etc. You may choose a single strategy or implement a combination of several to grow your business. Successful long-term business growth is neither haphazard nor random but instead based on well-conceived strategies and thorough planning.
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Daniel Roessler is a Consultant with DanR Consulting. You can email him at
dan@danrconsulting.com or call him at 713-264-2449
www.danrconsulting.com
