Business growth is not an option you can afford to pass on. In today’s economy a small business either masters growth strategies or it dies. This is why the vast majority of startups are out of business within five years.
Here we review the six most common small business growth strategies an entrepreneur can pick from. You only need one but the more you have the better you and your business will do.
1. Growth Strategy: Product Expansion
With this growth strategy the focus is on creating and launching new products and services for existing markets. For example, a commercial maintenance company with a substantial portfolio of clients and a reasonably well trusted brand could introduce a complementary new service providing building security. Combining these two services under one roof makes sense even from the client’s point of view since most people prefer to have to just make one phone rather than two if something is amiss. There’s also the issue of trust. If the maintenance company is performing good work it stands a very good chance of selling a closely related service to current clients.
2. Growth Strategy: Diversification
This particular growth strategy calls for creating new products and services for as yet untapped markets. Consider a manufacturer of safety helmets for the construction trades which then adds a line of hard shelled helmets for recreational use such as mountaineering. While expansion into new markets is challenging it can be pulled off provided the company takes the time to both properly research it and come up with a winning design. It also needs to have a sales and marketing department that can effectively sell its new products.
3. Growth Strategy: Alternate Channels
This growth strategy involves finding new distribution channels to push your offerings through. The easiest example to muster is of a bricks and mortar company setting up an online division to sell its merchandise. Marcus Lemonis of reality show The Profit is a master at finding one of food or dessert manufacturers, such as a restaurant, and then taking the concept national himself or at least getting its products into big chains. Legendary old school marketer Joe Cossman got rich by finding great products that were selling well in one or two channels and acquiring the exclusive rights to sell them in others.
4. Growth Strategy: Market Expansion
With this growth strategy the focus is on incrementally growing your existing market. So your first pizza parlor is a smash hit due to Aunt Lucia’s secret topping recipe? Great, so why not open a second location across town? Or you may want to consider doing so in another town? Many successful entrepreneurs got that way by spotting new businesses with great potential in hot spots of innovation on the coasts such as New York and Los Angeles and then introducing them in the Mid West. Back as recently as the late 1980s it was next to impossible to find an espresso outside of the ten largest cities. Some people made a fortune bringing espresso bars to small town America. If you don’t live in NYC or LA consider vacationing there to look for ideas you can replicate back home.
5. Growth Strategy: Market Penetration
This popular small business growth strategy calls for finding ways to make your existing customers buy more from you. One entrepreneur who had been selling a tanning product came up with the idea of adding a new product: teeth whiteners. Someone who wants to look like they just came back from two weeks in Maui is very likely to also want white teeth if only for the contrast. If you sell umbrellas why not add other rain gear such as hats and galoshes? To implement this growth strategy look for complementary products which can be used as up-sells and cross-sells. Strive to get customers to not only buy more on each sale but to buy more frequently.
5. Growth Strategy: Mergers and Acquisitions
This is typically the fastest growth strategy once you have some momentum. Before that can happen the business owner has to upgrade his skills set by learning how it’s done. The first deal is the hardest to do as a rule for a number of reasons: 1) the owner is inexperienced in the art of doing deals, 2) he may not understand how to raise capital for a deal, and 3) businesses for sale can be hard to find if you’re not a player in the deal community. However, once a couple of deals have been completed the resultant momentum can lead to fast and ongoing growth as sellers start to come to you. You can buy up competitors, suppliers, and customers. That’s why this is the billionaire’s favorite growth strategy.
As you can see there’s really no reason to have stalled growth. There’s an ideal growth strategy for everyone.