5 Business Growth Strategies for your company to increase profit
Most of the big companies started out small in the past but the reality is that only a handful of small businesses will eventually grow to become big brands. According to statistics,
- Only 50% of startups survive more than 5 years
- 9 out of 10 startups fail
- Only 0.1% of businesses ever reach 250 million in annual revenue.
Growing a successful business is easier said than done and companies of all sizes face a lot of challenges. Wondering how you can ensure that your business is sustainable? You need to develop a growth strategy for your company. If you don’t have a solid plan for growth, you are actually increasing the chance of losing your business to your competitors.
If you want to grow your company, you need determination, good business practices, and application of good business growth strategies. Keep in mind that an effective growth strategy is more than simply envisioning long-term success. You should figure out measurable steps in your growth and follow them.
Of course, small and medium-sized businesses vary greatly in their size and capacity for growth. They have different organizational structures and management styles but it is apparent that SMBs experience common business growing pains and problems at similar stages in their development.
In this article, we are going to discuss the stages of business growth and types of business growth strategies that can be used by any business to achieve long-term success.
Rewards and Risks of Business Growth
Let’s start with business growth definition. A lot of dictionaries define growth as “an increase, expansion or development”. Business growth is a stage when the business reaches the point for its expansion and searches for additional opportunities to generate more profit. Keep in mind that business growth can come in many forms and you shouldn’t focus only on revenue or asset growth because, in this case, you risk missing out making efforts that can result in incredible returns. In fact, business growth means a lot of things that include increase in sales, market expansion, and growth of business value.
Growth is the goal of any business and there are 2 types of business growth:
- Organic business growth is slow and tends to be safer because you are growing naturally just by doing more of what your business is good at. Besides, you have more time for building the necessary capabilities to support your expansion and manage it.
- Rapid business growth is possible because of implementing a successful business strategy. It can be very profitable but, at the same time, it involves certain risks and challenges.
There are plenty of reasons to pursue business growth such as increased revenue, increased importance in the industry, and wider brand recognition. Well-known brands typically spend less time and money on marketing to reach new customers and keep them. Instead, they can use their funds on service expansion and product innovation. Besides, they can easier attract big-name clients, top talent, and investors which are necessary for a company’s growth.
Business growth may lead to revenue loss if your decisions are not based on a significant amount of market research. According to surveys, about 42% of failed startup companies reported lack of market need as the key reason for their failure. Other leading failure reasons are failed pivots in products and services, hiring wrong team members, and legal challenges. The good news is that most of these growth issues are avoidable.
What should you do to avoid pitfalls or at least minimize the risks of business growth? That’s clear. Your decisions should be informed and based on long-term goals rather than on day-to-day needs. So before making an attempt to expand your business, you should take time to document your expansion strategy and ensure that your decisions are based not on assumptions but on reliable business data.If you think that this is too complicated for you, you can always rely on professional help of Extrabrains’ business experts. We can help you develop a business growth strategy that details your specific business goals and defines steps you need to take for meeting those goals. This document can serve you as a road map for decision making and it will help you avoid risks.
5 Stages of Business Growth
During the growth, all small businesses go through certain stages of the business life cycle and encounter specific problems that may require different approaches to their solutions. Understanding which stage you are in can make a great difference in the strategic planning and operations of your business. You enter a business life cycle at the moment you decide to set up a business and the beginning stages are almost always full of challenges and business growing pains.
1. The development stage is just the beginning. You have a brilliant idea of starting a new business, and you are ready to take the plunge. You need to test your business idea – perform market research, gather feedback from your friends and the industry specialists to understand whether your idea is worth pursuing. If your idea is a breakthrough that should change the existing market, the value of consultation is somewhat limited. You should build an MVP (Minimum Viable Product) to crash-test your idea.
2. Startup stage. Your business is legal now. You have developed products or services that your company has to offer and start marketing and selling them. At this stage, the major problems are obtaining customers and delivering the products or services. The business strategy is simply to remain alive and became viable.
3. Survival stage. Now the business has enough customers and adds new ones. The business is generating revenue that helps pay for operational expenses. The company may grow in size and profitability and you may need to make changes in your business model before expanding your business to the mass market.
4. Expansion stage. The business is thriving. It’s time to expand and find new markets and distribution channels. You may add new products and services and have a rapid revenue growth. The key problems are how to grow rapidly and where to find money for that growth.
5. Maturity stage is final in the business life cycle. The business dominates in its market. The company has enough resources for detailed and strategic planning. If the company preserves entrepreneurial spirit, it can be a powerful player on the market. At this stage, entrepreneurs have 2 choices: expand further or exit the business.
Types of Business Growth Strategies
There are different types of business growth models. In the early stages, your goals are defined by the founder’s philosophy and are clear. The model for your company’s growth is simple business activities that can improve your margins. But when your business evolves to a more mature phase in its lifecycle, you will need to build a strategic growth map which will complement your business model.
Business is a living thing and it has to grow if it’s going to survive. There are several common business growth strategies and some of them may present more risk than others. You can also use a combination of some of them or their variations, taking into consideration your company’s size and capabilities. You can experiment and try 2 or more strategies to understand what combination works best.
To increase profit, you can employ the following strategies:
- Improving your marketing with existing product on the current market
- Penetrating into new markets
- Expanding product selection
- Expanding through acquisitions
This is the most practical and outside-of-old-theory-books strategy. It will apply to most small and medium-sized businesses. Most entrepreneurs are biased: we fall in love with our product and our marketing communication. Sometimes, the truth is: the target audience doesn't have the same feelings to what we do. The main goal of this strategy is to challenge ourselves on the choice of messages, user flows, and marketing channels. You need to accept the fact that even though you worked in a market for a long time, you might not know all your customers' needs and the reasons why some of the customers prefer your competitors. Start with an in-depth analysis of your competitors and learn from their successes and failures. Invest time in CRO (Conversion Rate Optimization) analysis. In doing so, you will get plenty of ideas for the improvement of your marketing operations. Having an unbiased pair of eyes or some Extrabrains by your side during this exercise will increase efficiency.
This strategy involves increasing sales of existing products on new markets. Market growth can take a lot of forms. You can expand sales to a new geographical area – a new city or a foreign country. This can be done via a partnership with distributors with established networks. If you plan to enter a new market in a different country, it’s important to consider differences in local regulations and culture. Well-known brands can do market expansion by offering franchise options to local entrepreneurs. In this way, they can enter new markets with lower risks. You can start selling products online through your own website or Amazon and eBay and reach national and international customers.
Product ExpansionThis strategy is also known as product development and involves launching new services or products on the existing markets. SMB typically use this strategy by offering different variations of their main product lines to reach large audience. For example, you can develop a premium version of your product for the luxury market segment. This method is a useful addition to any business growth model because it is based on the existing infrastructure. New products can be added by investing in research and development of additional products or purchasing rights to produce a product of another company.
This risky method is known as launching new products on new markets. It can be used as a valuable addition to the existing model. Before you start doing it, you should perform a good market research and be ready to invest a lot of money to establish your presence. You will also need to hire a lot of people and build new infrastructures. This method is good for more mature companies with a strong position in their target market. It can be done through mergers and partnerships.
Diversification can be
- Horizontal –developing new products and selling them to the existing customer group
- Vertical – when the business enters the sector of its customers or suppliers
- Concentric – developing a new line of products that are similar to the existing products
- Conglomerate – developing absolutely new products that appeal to a new group of customers.
This method is good for mature companies. To expand operations, businesses often purchase strong companies that are already operating in the target markets. The downside of this effective method is steep upfront costs but in the long run, it’s a cost-effective way to capture a new market or to increase market share. You can get an established customer base and operation which can be adjusted to your specific needs to add value. Besides, the company you buy may be profitable from the first day. It’s a good strategy if you want to expand your business into a new geographic location.
Need Help in Developing a Strategy to Grow Your Business?
Everybody knows that starting a business and growing it requires a lot of time, effort, and precise planning. It may be appealing to make quick decisions and big investments but if they don’t translate in fully sustainable and functional business models, they won’t bring results you expect and can lead to disappointment. Documenting business growth strategies is a must for all companies before they take steps to grow their businesses. Of course, you’ll need to research your market and the documentation will take some time but the upfront investment will pay off in the long run.
Developing a good growth strategy is not a one-size-fits-all process. It would be foolish to make strategic decisions based on successes of other companies. Of course, you can learn from another company but you have to develop a unique plan based on your company’s data. You should tailor your strategy to your specific business and your customers. If you don’t know where to start and need advice, Extrabrains can help you in the development of a successful growth strategy for your business. Our experts have an extensive experience in creating successful growth strategies for small and medium-sized businesses that really work and bring results. Contact us and schedule a free consultation to learn how we can help you develop strategic decisions that will naturally lead to successful growth.
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