As we discussed in our we discussed last month, most business owners will opt for growth over stagnation or decline if given a choice. But growth presents many business challenges, not the least of which is financing to support the increase in inventory and receivables that will be necessary to support growth.
Planning for business growth goes well beyond figuring out how the growth will be financed. Studies indicate that as few as 20 percent of companies actively pursuing growth achieve their revenue and profit goals. Successful growth requires developing a comprehensive business growth strategy that details exactly how growth will be achieved and sustained over the long term.
Paths to Growth
There are a number of different paths your company can follow that may lead to successful and sustainable growth. Here are five common business growth strategies to consider:
- Creating, marketing and delivering new products and services. On the surface, this is probably the most obvious growth strategy: Simply offer new products and services to your customers and prospects. But successfully executing this strategy is anything but simple. It requires knowing not only which products and services your customers want (and will be willing to pay for), but also which ones you can sell profitably.
Market research is usually the best way to answer these questions. Start by asking your current customers if they would be willing to buy certain new products and services from you, and if so, at what price points. Then perform in-depth market research on those that appear to have sales potential, including how much it will cost you to manufacturer or acquire the products or deliver the services. Just because a product or service is in demand doesn’t mean you should pursue it — you also have to be able to sell it at a reasonable profit.
- Penetrating deeper into your current market. Or in other words, selling more of your existing products and services to the customers you already have. This also seems relatively simple on the surface, but again, success requires careful planning and flawless execution.
Performing a market segmentation analysis is a good place to start. Divide your customers into a handful of different segments based on whatever criteria are most relevant to your business, and then analyze your sales and profitability figures for each of these segments. This exercise will help you determine which customers you should be targeting with what specific kinds of marketing efforts in order to boost the sales of certain products and services.
- Expanding into new markets and territories. Here, the idea is to market and sell your existing products and services to different customers — whether these new customers are in different niches or other geographic areas from where you’re selling now. Again, market research is usually the key to success. Carefully investigate any potential new markets or territories before investing the resources — both financial and human — into new market expansion.
- Developing new sales and delivery channels. Can you market and sell your products and services via different channels than you’re using now? The Internet is probably the best example of an alternate sales and delivery channel. It has literally changed the rules of the game for countless industries, from retail to music to stock photography.
Granted, not every industry is suited to online sales and delivery. But it’s at least worth having a brainstorming session with your marketing and sales teams to kick around ideas for ways that you could possibly use the Internet or another alternate channel to boost your sales and possibly open new market segments.
- Merging with or acquiring another business. This strategy is very different from the organic growth strategies previously discussed. A merger or acquisition can result in rapid sales and revenue growth and the realization of synergies with the acquired business, but there are many potential pitfalls as well. For example, completing a merger or acquisition will be an expensive and time-consuming endeavor that could distract you and your key managers from focusing on your core business. You might also have to share some business control with the owner of the business you are acquiring.
Usually, the most important key to a successful merger or acquisition is performing thorough due diligence on any company you’re considering acquiring. Your due diligence should focus primarily on the business’ financial condition, its client base and existing contracts, and the employees and management team.
Executing Your Strategy
“The best laid plans of mice and men / Often go awry,” the old saying goes (translated from the Robert Burns poem). This is especially true when it comes to executing your business growth strategy.
Once you have decided which one (or more) of these growth strategies to pursue, meet with your executive team to devise a step-by-step plan for how the strategy will be implemented and executed. This is the best way to help ensure that your plans for profitable and sustainable business growth become a reality.
To discuss your business growth strategy and plans in more detail, give us a call at (800) 773-7100 orContact us to request that a Relationship Manager contact you.