You’ve made it. You’ve moved past the initial startup phase of the business and are now entering into the second phase of entrepreneurship.
The company is relatively stable and you’re ready to focus on expanding. Even though your business is new, rather than focusing on tips that are geared to a fledging enterprise, you need tools that help you learn how to scale your business in a realistically sustainable way.
We have tips to help you take things to the next level—even if you’re still a startup.
How Do I Know if I Need a Business Growth Strategy?
Some business growth just happens. Rather than focusing on finding new business, suddenly you’re more concerned about increasing resources, or finding the time to get everything done.
More often, a business experiences growth due to careful planning. This is a process that’s different for every business. Factors affecting planned growth strategies can depend upon your finances, including cash on hand, or perhaps external factors, such as supply chain. It may be that competition or government regulation needs to be taken into consideration.
The goal for a business owner is to grow the company, whether it’s higher revenues, better brand recognition or increased market share in the industry. While you may simply want to grow to achieve these benefits, there may also be signs in your business that you need to change things up a bit.
What are some of the factors that may signal it’s time to develop a sound growth strategy to guide the next phase of your business?
- Your profit margin is shrinking.
- You see a way to eliminate the middleman to increase your profit.
- You need better cash flow.
- You need a new challenge.
- You’re losing business to the competition.
Common Business Growth Strategies
There are some typical business growth strategies upon which your business may decide to draw. Because each business is different, the strategies may be generic but how you implement them will be business specific. Here are four that you may consider:
Acquisition of other companies. If you’re franchising, this could mean adding more locations. Or you could buy out competitors to enter new markets and expand your staff. The benefit of business growth through acquisition is that the business probably already has a client base, an established reputation, and even a staff that you can leverage to grow your existing business.
One caveat: There is always risk involved with buying out another company. You’ll have to work hard to integrate their existing processes into your accepted way of doing business. The existing staff may feel uncomfortable or uncertain about the buy-out. This could affect business productivity down the road.
If you go this route, your strategy for choosing that particular business should be well-thought-out, particularly because there is usually a substantial investment of money and time in this process.
Diversification. As a growth strategy, diversification means you decide to branch out and deliver new products and services. Or you may diversify by market and sell your existing products to a vertical, geographic, or another type of new customers (see market development strategies, below). Diversification could also include adding new services, features, or products to your sales portfolio. It may mean a new partnership with another vendor or some other very strategic partner. The risk in a diversification growth strategy, simply, is that it might not work.
Planning for growth with this approach will take cash, in part, because marketing will be key to your rollout. If you can, consider a pinpointed growth strategy in this area, not a carpet-bombing. In other words, if you’re rolling out a new product or service, don’t go all-in until you’ve tested it gradually to see if the market will support further growth.
Market development. Growth strategies utilizing market development entail taking your existing products or services and selling them in a new market. You might select this strategy because the competition in your existing market may be encroaching on your business, so you leapfrog out of the region to eliminate that pressure. Or you may simply find a new use or a new way to market your products or services. Maybe you have a retail store and you’re ready to also launch an e-commerce site (or vice versa). Or you discovered an existing product is suddenly very popular with an entirely different set of customers.
One of the benefits of small business ownership is that you can capitalize on unmet market needs that crop up and disrupt the market. Small businesses are fairly agile by nature, so you can quickly scale up to capture more sales. However, that’s different from actually planning a market development growth strategy that is proactive and not reactive.
Product expansion. This strategy can grow your company by adding a specific new service or product. There may be an overlap between product diversification and even market expansion strategies. Typically, though, product expansion stays within an existing market but increases the capabilities of a product feature or service line. This happens frequently in technology companies that release new versions of their products with improved features.
How Do I Establish Business Growth Strategies?
A business growth strategy is a goal. As a small business owner, you’re familiar with the goal-setting process or you wouldn’t be where you are today. Like all goals, your business growth strategy should be SMART:
What do I want to accomplish with the growth strategy I’ve selected?
What resources will I need?
How will I measure the success of the initiative?
Can I plan this growth in a way that is sustainable and doesn’t create too much risk?
How will this effort impact my customers, my staff, and the market?
At what point will this initiative achieve my goal? What will that look like and when will it occur?
Once you’ve figured out your business growth plan and set SMART goals, it’s time to visually document the strategy either for yourself or perhaps for your team, or even, if you have them, for your investors.
Step 1: Identify your business goals.
- What do you hope to achieve with your business goals? Is it more revenue? More stable cash flow?
- Do you want to add more members to your team?
- Do you want to drive your competitors out of business or take over some of their market share?
- If you’re in a service business, is your goal altruistic?
Step 2: What internal or external factors will affect these goals?
- Do you have the staff you need to achieve your goal?
- Do you have adequate funding necessary to grow?
- How much and what kind of marketing do you need to reach your goals?
- Are there internal workflows that will need to change?
- Will the market support your growth?
Step 3: What steps do you need to accomplish to achieve these goals?
- It’s always a good idea to roadmap all of the steps necessary to achieve your growth strategy.
- Make sure your plan includes taking care of your existing customers. Growth is more than just grabbing new customers; you must also retain current clients.
- Give yourself some leeway in this planning process. For example, if Plan A doesn’t work, what is Plan B? What factors could disrupt your careful planning?
- Recognize that there will be some bootstrapping involved; entrepreneurship, by nature, requires your ability to shift with the unexpected.
Developing a sound growth strategy also requires solid financial planning. Determining the costs of your expansion and then seeking small business funding is the final step in developing a growth strategy.
Small Business Funding for Growth
Developing a thorough cash flow forecast is crucial to implementing your growth strategy. You must have enough cash flow available to sustain the core business while also scaling up to achieve your growth goals. Businesses looking for capital to achieve growth have several options beyond traditional bank loans. They include:
- Angel investors are affluent investors that provide business capital. Many times, this is in exchange for ownership equity or convertible debt.
- Bootstrapping your business means you provide financing with your own funds. That could be credit cards, savings, or some other option, including 401(k) funding or seeking help from your family or friends.
- Crowdfunding is when you raise the money through your family, friends, or other supporters in return for rewards. There are a number of websites that help you accomplish this fundraising effort via social media.
- 401(k) or IRA funding lets you use your retirement or savings to help fund your business or project. Click here to find out more about Rollover as Business Startups (ROBS) funding.
- Small Business Administration (SBA) loans are lower interest cash infusions backed by the federal government. A variety of terms and conditions apply.
Benetrends Financial is a resource for small business funding. For more than three decades, we’ve helped launch and scale small businesses. We’re proud of our work to help thousands of entrepreneurs realize their dreams of small business ownership. Click here to pre-qualify for your funding options to fuel the next stage of your business.