People sometimes ask business school professors what types of business growth strategies are particularly relevant for small businesses or startup organizations. To be honest, there is not really a ‘specific’ growth strategy that works for all small businesses or startups. Every business is unique – that is what makes organizations so interesting to study. I have mentioned in the past that there are no rules for riches. Indeed, if I was to tell you that if you did business in this specific way, you will make a lot of money, I would be rather embarrassed. The only thing that I know which works is just ‘elbow grease’ (aka. hard work) for years or decades, but most people don’t want to listen to that kind of advice. I have not seen very many people that have had reasonable sustained success with any sort of ‘hack.’
Anyway, I thought I would write a small post about the different types of business growth strategies. Before I begin, you should know that this is all part of my r3ciprocity sharing economy proofreading software project in which I am trying to help out others as freely and openly as I can.
All Businesses Are Resource Constrained.
The key is to business growth strategies is to think about growth that is within your control. You will not get rich over night, or your business will not become a Fortune 500 company overnight. If your business does grow that quickly, it is very hard to sustain in the long-run. Growing your business will take a lot of time.
You should be aware that all organizations are resource-constrained. This means that you will never have enough money, time, or people to do all of the projects that you wish to do in your company. It does not matter if you have 5 employees or 50,000 employees, you will never have enough resources, and you will always want to grow more than you possibly can. You will just have to get used to this idea that your resources are limited in the short-term.
All Businesses Need To Prioritize Projects.
What is key to business growth is not growth par say, but rather to prioritize the type of growth that you’re going to focus on. Generally, the more focused you are particularly when your small business or a startup the better off you will be. However, this depends on whether you found your niche as a business. Sometimes it make take a little bit of exploration before you find the best business model that fits what you want to do. This is normal and natural. However, just know that the best business growth strategies are somewhat focused overtime.
You might also want to develop a way to prioritize your projects that you pursue going forward. Maybe your organization develops a checklist, a formula, or has regular meetings to discuss how you should grow going forward. It would be wise to think about creating a systematic way to think about growth, if you have time. There is no magic way to come up with prioritizing your business growth, however, you just have to do so systematically or what works for you.
Business Growth Metrics.
It is often wise to think about metrics in how you want to grow. You can focus on profitability, but you can also grow the number employees or resources you have in your control as a manager. It really just depends on the stage of growth, the industry, and type of organization you manage. There is no best answer on how to measure growth. For example, large government organizations are likely to focus on resources that they manage or clients that they serve, rather than profitability. However, you think about the growth metrics, and how you are going to measure growth of the organization to have a good idea of how to best manage the organization and prioritize resources.
What Types Of Growth Strategy Can You Choose?
In general, there are three broad growth strategies that you can choose for your business. You can grow deeper relationships with existing customers, you can diversify into related or unrelated areas, or you can acquire other companies. Any one of these strategies is fine, however, you have to choose the growth strategy that best fits your business and your style of management in the organization.
Growing Your Existing Market As A Business Growth Strategy.
The best growth strategy is simply serve your existing clients better. Even if you have 1 or 2 customers (some businesses do, by the way), you can see how you might try to serve these specific customers better. This might be producing more content, making you were product more easily accessible, solving different kinds of problems for your customers, or specifically solving the needs of your existing customers in a faster or more efficient way. Try to figure out how to reduce the problems that your customers have, and continue to reduce these problems. You can ask your customers what are their biggest problems, and solve the problems that come up the most. If you choose this business growth strategy, your customers will be your salespeople because they will be very excited that you are helping them out so much that they will tell others about how good you are.
Market Expansion And Product Diversification As A Growth Strategy.
Once you figured out how to serve your customers to the best of your ability, try to remove yourself from the equation as much as possible. This is where you think about creating organizational processes, standard operating procedures, systems, and other people to serve your functions that you have in the organization. By the way, when you do that you set up a functional organizational structure for you single business.
Once you make your existing business so efficient that you can devote resources to other others, you can start pursuing other markets. Generally, when you first pursue growth, you likely want to pursue closely related growth avenues to what you are doing right now. Why? You want to build an identity and competence in that one particular area. The goal is to find possible ways to serve your existing customers and to identify new customers when you do this business growth strategy.
You might also want to consider market segmentation of your existing customers. For example, you can lower your prices for one type of customer and over them a bare-bones version what you offer. You can also try over premium services or products to existing customers and better serve these existing customers.
You can do unrelated diversification, which is where you try to serve completely different markets to reduce your dependency on anyone market. The trouble with unrelated diversification is that it is very difficult to do well because you have to focus on multiple markets, which makes you run the risk of poorly managing any of the markets.
Mergers and Acquisitions As A Growth Strategy.
The previous growth strategies were what are called organic growth strategies. These growth strategies focus on better utilizing and growing the existing resource base for the organization using their own resources. Another type of growth strategy is to focus on mergers and acquisitions (M&As) as a growth strategy. Many, if not all, large corporations undergo mergers and acquisitions. You can be relatively small and still merge and acquire other companies. For example, if you have a 1 person house cleaning company, you could acquire another 1 person house cleaning company, while purchasing the owner’s skill-set and their client-base. The goal in this example is to pick a company that better serve your existing customers and grow your customer base some how.
What you should aim for with this strategy is ways in which the target company can either complement or benefit your existing competences. For example, if you clean houses in one side of town, you likely want to look for someone that is hard-working in neighborhood that is adjacent to where you currently are, to expand into that market.
You can also acquire another company because that have good equipment that you can get a deal on. For example, you can acquire the cleaning company next door that is distressed because they took on large amounts of debt. In doing so, you can acquire maybe a used vacuum, and their vehicle at a discounted price.
The goal, of course, is to look to acquire another firm to match your existing business in terms of their management style and strategy. In addition, most acquisitions should be only pursued if their is tremendous benefit from doing so. The costs, and the potential for failure, generally outweigh only a moderate amount of gain from the acquisition. The acquisition should appear so appealing that you cannot wait to do the deal.
The Type Of Business Growth Strategy That Works For You Depends On Many Factors
I cannot stress it enough that the type of growth strategy that you choose for your business really depends on many factors, and there is no one way that you should pursue growth in your business. To be honest, you probably have to pursue all three types and other ways to grow your business, such as through alliances. You have to be quite opportunistic with growing your business, and just take opportunities that make sense for you and your business.
The business growth strategy also depends on the business’s environment, technology, people, culture, and many other factors. For example, performing a merger and acquisition might not work well if you have one type of organizational culture and the target has another type of organizational culture. Or, you might choose to pursue organic growth through expanding your existing customer base because you have invested in a vital piece of technology that is in demand. You can read more about why it is important to have products and services that are both in demand and scaleable here.
Of course, this all assumes that you want to grow your business. There are many people and organizations that choose not to grow, and that is completely fine. It is not unusual to stay one size (many stay at 5-10 employees or 100 employees, depending on who is managing the organization) to serve the existing customer base to the best of your ability. Again, these would be excellent businesses, and probably better run than most people can do, so it should not be downplayed because they are not steadily growing.
By the way, if you would rather watch me talk about these types of growth strategies, you can watch the YouTube video here:
I hope you found this blog post helpful. That is my goal. I will try to be has helpful as possible to others.