- Grow Your Business
The Importance Of Growth
An established business needs to be constantly on the lookout for growth opportunities.
Without a growth focus you give your competitors the opportunity to increase their share of market at your expense. You become totally dependent on the sources of income you already have and any losses can be catastrophic.
A healthy business targets and achieves growth. A business that isn’t capable of finding new sources of business will eventually become unsustainable and fail.
What We’ll Cover
I’m going to cover the many ways you can find new sources of business with an emphasis on those ways that will generate a growth in business but not a huge growth in expenditure.
We’ll look at your options– all the possible ways to generate profitable growth that you can choose from. We’ll also go through the process of analysing your business and how to decide which will be the best ways to achieve growth in your own organisation.
I’ll talk about increasing your share of market, diversifying your offering and introducing new products. I’ll also cover entering new markets and how you can form alliances or partnerships with other companies to tap into new sources of businesses.
And finally we’ll look at how to analyse your business’ strengths so you can build on them to grow in the right directions.
Measurements Of Growth
How can we measure business growth? Business growth can be measured in many ways. Some of the more familiar metrics of growth are:
- Total turnover
- Profitability
- Share of market
- Business size – team numbers, asset values, land area under management, funds under management
The growth metrics that will best apply to your organisation depend on factors that include your type of business, your industry, and how long you’ve been in business.
Generally a business can be said to be growing if its turnover and profits are both increasing. These are the two most important measurements of growth.
Have You Heard About Disruptive Innovation?
Growth opportunities can be created, even where they didn’t previously exist.
Businesses that create their own growth are called ‘new-growth’ businesses. Their success comes from their ability to create new products and services that appeal to segments that bigger companies ignore.
Harvard Business School Professor Clayton M. Christensen called this creative process ‘Disruptive innovation’. It explains the success of many smaller businesses that grew at the expense of much more powerful competitors.
Two Familiar Examples
For example, the first digital cameras were pretty crude and couldn’t match the quality of film cameras so the big camera makers kept on making cameras that used film.
This left a big opening for smaller consumer electronics manufacturers like Samsung, Canon, and Hewlett Packard that entered the market and have seen it grow exponentially.
In 1955 a very small company introduced the pocket radio. It offered static and low-fidelity and had little appeal for the established hi-fi market but it appealed to teenagers who could now get away from their parents and take their music with them.
Sales boomed and that’s how Sony got its start.
Principles Of Disruptive Innovation
Let’s look at some of the ways in which a business can improve its chances to grow using the principles of disruptive innovation.
You can take on a competitor with disruptive innovations that either create new markets or appeal to the worst customers of bigger companies.
Lower performance levels are acceptable if your product or service is going to be cheaper or more convenient to use.
Consumers previously locked out of a market because of cost will welcome a simple product if it allows them to get done what they want to get done.
Conventional market research is hard to apply to markets that don’t really exist.
Let the tasks people are trying to get done inspire your design.
Be patient for growth but impatient for profitability. Force yourself to keep costs low and expansion quick.
Investment capital is hard to come by and most companies – even successful ones, can’t sustain rapid growth for more than a few years. It’s essential to make the most of any money invested towards growth and that’s what disruptive innovation can do.
Are You Set For Growth?
There are several options every business has for growth. You need to analyse each one for its applicability to your business before you can plan an effective growth strategy.
Increase Customer Spend
First let’s admit that it’s not strictly a way of finding new sources of business, although if you don’t make the effort to increase the spending of your existing customers you’re probably missing one of your fastest growth opportunities.
There are several ways to focus your marketing activities on existing customers and get them to spend more each time they buy from you. Here are some proven ways to do this:
- Offer credit terms that encourage a higher spend
- Create loyalty programs that link them to you
- Launch new products that appeal to them
- Make special offers to them, and
- Sell-up to premium products when they make a purchase
The most important consideration with all of these is that you’ve already created the customer. The trick is to enhance the value of the offering you make to them.
Increase Your Share Of Market
This is all about taking business away from your competitors. Ask yourself:
- What are your competitors’ strengths?
- What are your competitors’ weaknesses?
- Why do customers buy from your competitors? Can you create a better offering?
- How can you communicate a better value proposition to your competitors’ customers?
- What is your Unique Core Differentiator? How can you use it in your marketing?
To increase your market share by taking business from your competitors you need to know the answers to these questions and use them to formulate a marketing plan.
You need to be better than they are at getting and retaining customers.
Come up with a better value proposition and communicate it to the customers of your competitor.
Diversify your offering
You can grow your business by diversifying in several ways:
- Sell your existing products to new customers
- Sell new products to your existing customers
- Sell new products to new customers
For example, a sporting goods retailer may decide to expand into sporting memorabilia that would have an appeal to its existing customer base and generate add-on sales revenues.
It might also create a series of special ‘team packages’ that would have appeal to schools and sports clubs as a way of targeting these areas.
To capitalise on its customers’ interests it could team up with a ticketing service and offer on-the-spot facilities to purchase tickets to sporting venues.
And it could even open a shop on its premises that sold healthy fruit drinks and high-energy foods.
Diversifying As A Strategy
All products have a life cycle that rises to a sales peak then falls off. Diversifying is the best way to prevent a business from being caught with too many products approaching the end of their life cycles at the same time.
Diversification requires an understanding of your customers and your market. It means researching new product opportunities and expanding into new markets.
The closer your new products are to your old products in terms of function and appeal the less your risk will be when introducing them to existing customers. You can market them as upgrades or replacements during repurchase cycles.
The greatest challenge comes when you try to introduce new products to a new market, and that usually requires the biggest marketing expenditure.
Branch Out To Related Products
If you want to expand your product line or services, you can save on the costs of marketing by introducing new products that are related to your existing ones.
For example, if you are selling women’s clothing you can add a line of women’s shoes because both types of products are purchased by your existing customers.
If you were to expand by adding a line of men’s clothing you would be entering a different market that would require much greater resources to establish.
Enter A New Market
Your existing market may not offer enough possibilities for growth. Markets expand and contract and if yours is contracting you need to find other outlets for what you sell. The same applies if your existing market becomes oversupplied.
Growth can come from entering new markets. A market can be ‘new’ because it’s in a different geographic location. It can be ‘new’ because it’s comprised of a new set of customers for your existing products. It can be ‘new’ because it’s based on new products being sold to your existing customers.
Regardless of which type of ‘new’ market you’re entering, you need to know the answers to these four questions before you make the financial commitment:
- Who are your potential customers?
- What do they want to buy?
- Who are your competitors?
- How will you market your products?
This is basic and essential research for any company considering entry into a new market.
Selling To New Markets
You’ll have to decide how to sell your products or services to your customers in new markets.
Depending on your product, you may be able to sell directly into your new market. For example, you might be able to sell over the Internet, by mail order or by exhibiting at local trade shows.
However, many businesses will benefit from establishing a more solid presence in new markets, either directly or through a local partner:
- sell to a distributor who then resells your products into the new market
- appoint an agent who sells products on your behalf
- set up a joint venture with a business that’s established in the new market
- open a branch of your business in the new market area
Marketing To New Markets
Your marketing and sales promotion must be appropriate to the new market you enter. You should consider using the services of a local marketing firm, at least while you’re getting established.
It will cost some money but help prevent marketing mistakes that even big multinational marketers can make:
- Clairol introduced their “Mist Stick” curling iron into Germany without changing the product’s name. They didn’t realise until it was too late that in German “mist” means manure.
- Pepsi launched their “Come alive with the Pepsi Generation” in China, not knowing that the theme translates into “Pepsi brings your ancestors back from the grave” in Chinese.
- General Motors introduced their Nova sedan into Spanish-speaking markets only to find that “No va” in Spanish means “doesn’t go”.
Form An Alliance Or Partnership
One of the fastest growing trends for business today is the increasing number of strategic alliances. According to Booz-Allen & Hamilton, strategic alliances are sweeping through nearly every industry and are becoming an essential driver of superior growth.
A strategic alliance is an arrangement between two companies that combine resources to gain additional business.
Strategic alliances are formed when one company alone cannot fill the gap in serving the needs of the marketplace. It involves two companies that pool together their expertise and resources to enter new markets, share financial risks and get products and services to market faster.
You should be targeting the same or very similar types of customers/clients, but you don’t compete for the same sales. In other words, the two of you are not selling the same products or services.
Alliances Suit Small business
- Strategic alliance
Whatever their structure, one goal prevails: strategic alliances are opportunities for small businesses to accomplish things that would otherwise take much more money or staff time.
Small business owners are usually fairly limited in their product development and marketing resources. Most SMEs will benefit from establishing cooperative arrangements with other organisations.
Joining forces with another organisation can allow you to share expertise, production and other assets, expenses, and to manage risk without necessarily incurring debt or trading equity.
Marketing And Product Alliances
A marketing alliance is a joint effort between your business and other businesses to build awareness of the benefits of your respective business products or services. It can be as simple as exchanging mailing lists or producing a catalogue offering the products of both companies that saves on printing and postage costs.
A marketing alliance expands your market without the usual expenses of acquiring a new customer base.
A product alliance with another business allows you to offer your partner’s products or services to your customers, while your alliance partner sells your business’s products or services to its customers.
This means that you are able to expand your product line without any of the usual costs associated with introducing new products – manufacturing, distribution, or the creation of a product inventory.
Find A Partner
Key customers can be good partners. If you are selling a substantial amount of your products to one customer, you have the opportunity to explore a strategic alliance between your organisations.
Aside from the possible growth in sales, cementing the relationship into a long-term business alliance will help prevent the risk of losing one of your biggest customers.
Brand leaders can add prestige through association. If a brand leader wishes to join forces with you in any capacity it’s deserving of your thorough consideration. The opportunity can arise from a joint advertising effort or perhaps joint sponsorship arrangements, but the gain in this case will be yours.
Although non-competing businesses usually work best in business alliances, it can be beneficial to incorporate competing businesses in business alliances. You may work with a competitor to service contracts that would otherwise be too large for either of you to handle by yourself.
It’s also possible to refer customers that you’ve obtained to your competitors if your resources are overextended and receive a share of the profits earned.
Establish A Joint Venture
A joint venture is a form of alliance that unites two separate businesses in a specific business enterprise. For example, you have a product but no distribution facilities. You find another business with distribution facilities that can market your product for a share of the profits.
There’s no other connection between the two businesses as there would be in a partnership, so entering a joint venture can be quick and so can ending it. It’s a good way to ‘test the waters’ before committing your own capital to setting up distribution facilities.
Merge With Or Acquire Another Business
Mergers and acquisitions, or ‘M&A’ as they’re often called are a growing trend in business. Both create a larger enterprise that has the potential to enjoy a stronger market position and greater economies of scale.
A true merger occurs when both businesses dissolve and place their assets and liabilities into a newly created third entity. This entails the creation of a new corporate body.
An acquisition is also called a ‘takeover’ or ‘buyout’. It’s simply the purchase of one business by another.
Mergers and acquisitions can be part of a growth strategy, even for a small business, although it’s usually the case that a smaller business is simply acquired by a larger one and the smaller one disappears.
Use The Customer’s Perspective
Approach the formation of alliances from the perspective of your own customer base.
Develop a profile of your customers that shows what they buy, how much they spend, what else they buy, and any other attributes you can apply. Then create an alliance that meets their needs as well as yours.
A good example would be an alliance between a landscape gardener and a nursery. Both sell to customers with similar interests, but they do not compete directly with each other.
There are several ways that you can form an alliance or partnership with another business that will add value to both organisations.
Dare To Be Different!
If you’re just starting up a new business venture you should go for growth from day one. You need to look for ways to distinguish your product or service from others who are already in business.
Being unique does not necessarily mean that no one else provides the same product or service. What it can mean is that no one else is providing the product or service in the same way that you intend to provide it.
You can create differences simply by finding better ways of serving selective segments of a market. This sometimes is accomplished just by adding a new twist to something old, or by marketing more creatively.
Target Affordable Markets
The marketing and distribution methods that you choose will significantly affect both your costs and your revenues.
Which marketing options will reach the most customers at the lowest cost? Small businesses usually have practical limitations on the channels they can use to reach markets.
The key factors in selecting your distribution channels are financial resources and cost effectiveness. What can you afford? What will give you the best return for your investment?
A small business actually needs to work harder than a corporate giant when choosing how to expend its limited resources of time and money.
Make Every Customer A Volume Purchaser
An ideal growth business has a lot of repeat customers or customers that need to keep buying supplies or products from you. The lifetime value of a customer should never be discounted, and once they’ve bought from you, you should be able to get them back.
Every growth-oriented business needs to either create products or services with repeat sales potential or to have highly-priced unit sales.
Drive The Business With New Products
As I said earlier, every product, idea or concept has a life cycle. It can be a huge success in its early stages, but no matter how enthusiastically it may have been received at first, sales will eventually start to fall off.
You need to monitor your products and your market so you can identify whether the demand for your product or service is increasing, static or declining. It’s possible to resurrect a declining product by repositioning it, improving it, or repackaging it, if only for a limited time.
Once an old product has reached the end of its cycle you have to have a new product ready to go or you risk losing your position in the market.
The majority of new products fail, even if they’re introduced by big-brand marketers.
Go With Your Strengths
At the beginning we talked about growth metrics. It’s up to you to analyse the various options for growth and choose the ones that will have the best impact on your business’ measurements for growth.
To make the best choice of options for your own business you’ll need a good understanding of how your business is performing – where its strengths and weaknesses lie. It’s always best to go with strengths and build on them.
Avoid anything that’s too far away from what you’re now doing. A bookstore trying to expand into sales of kitchen appliances would be facing an uphill battle.
You need to be certain you have both the resources and the ability to make it work, and of course you have to be sure it’s going to increase your profitability or it’s not worth going into.
Summary
As a small business marketing consultant, I have discovered that there are many ways to grow your business, some on your own and some by forming alliances with other organisations.
You can grow your business by increasing returns from existing customers, by acquiring new customers, or by a combination of both.
You need to set growth targets for your business and decide how to measure your progress towards them. If you’re starting a new business it should be set up for rapid growth from the beginning.
If you develop growth strategies that recognise your current strengths you’ll have a much better chance of achieving growth with minimal risk.
Just remember that all businesses need to create growth opportunities or they risk becoming unsustainable. Any company that doesn’t find new sources of business will eventually go out of business as its existing customers depart.
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