Business growth is not solely determined by an increase in sales and market share. In fact, there are up to 6 factors to consider when measuring business growth.
The Fortune 100 and the Inc. 500 comprise businesses that give priority to growth. However, none of these firms is guaranteed of growth; as we have seen in the past, the fortunes of a giant company can drop in the face of unfavorable market conditions, while those of a start-up can blossom when the operating environment is favorable.
What then is business growth, and what can you as an entrepreneur do to realize sustainable expansion in your venture?
To understand what to do, read this article where we tackle the importance of and the right strategies for business expansion, backed up with replicable real-life examples.
Table of Content
- What is business growth and development?
- Why is it important for a business to grow?
- What are the 5 business growth strategies?
- Examples of business growth strategies
What is business growth and development?
According to the BusinessDictionary, business growth is the process of enhancing a given measure of a company’s success.
From this definition, we can tell that business growth is not realized solely by increasing business revenues through higher sales or service income. Instead, you can expand your business in many other ways, including minimizing the operating costs.
Depending on the nature of your business, you can achieve business growth by incorporating the following aspects:
- Acquiring new customers
- Maintaining existing customers
- Adding new branches or locations
- Running a franchise
- Expanding product lines
- Increasing sales revenues, gross profit, or EBITDA (earnings before interest, taxes, depreciation, and amortization)
Other aspects, such as a higher number of employees, value adds, production technology, or rate of change in products, also mark business growth. However, it is essential to note that growing in one measure may affect another negatively. For instance, when you increase sales by lowering product prices, you may end up hurting the revenues.
As you aim to grow your business, don’t feel obliged to use a particular metric. Instead, use a measure or aspect that fits your business goals.
But how does business growth relate to business development?
Business development is a set of tasks, processes, or activities a small or large organization undertakes to develop and implement growth opportunities.
Internal activities, such as reputation building can help a business grow in the same manner as external activities like planning systems implemented by the government to boost small firms.
Why is it important for a business to grow?
There are many reasons a given business would be aiming to grow.
For instance, start-ups are normally in the early stages of business growth; hence, they aim to improve their position in the market and break-even as fast as possible.
Established businesses don’t always have to increase their profits or market share. However, they still put in place processes and systems to ensure they have enough sales revenues for liquidity and to protect against future risk.
It is also crucial to note that growing fast and growing well are two different sides of the same coin.
Whether a start-up or an established entity, a growth-driven strategy is better than growing fast. The former helps the organization build the infrastructure necessary to sustain every stage of growth.
When you focus on strategies to grow your business, you find, establish, and effectively execute mechanisms to sustain your position in specific market segments. A growth-driven approach takes time but would derive the best results for your business.
What are the 5 business growth strategies?
Before we dive into strategies for business growth, let’s examine a few facts about the topic.
According to the U.S. Office of Advocacy, approximately 78.6% of the new businesses established between 2005 and 2017 survived one year. The figures also suggest that only half of new firms survive for more than 5 years. Indeed, only 45.4% of the firms founded in 2006 survived this long, compared to 51.0% of the businesses started in 2011.
Sadly, only one-third of companies survive for more than 10 years.
Let’s say 413,590 companies are established this year (Figure 1). Going by these statistics, only 187,770 (45.4%) to 210,931 (51.0%) of the firms would live to celebrate their five anniversary or more. Additionally, only about 137,863 of the establishments (one-third or 33%) would survive for 10 or more years.
These numbers highlight how important it is to plan for business growth from the start.
The following 5 strategies are what you need to ensure your organization lives to see the future – they demonstrate the things you need to do for your business to live through unfavorable changes in customer base and market conditions.
1. Brand licensing
If you’re looking to grow your business efficiently and quickly, you can license your product, service, or idea to others.
You can start by licensing a popular or successful product to a business with a large market share, enabling you to grow more quickly.
Licensing refers to renting or leasing a brand to other associations or companies that want to use it together with another product or service for a given period within a given environment.
Companies, such as Coca-Cola, use this strategy to grow their business by leveraging on people’s love, emotion, and bond with the brand. People believe in the brand so much that they want to see it expressed in sporting activities or other huge global events.
When you license your brand, you diversify into new opportunities, while not diluting your primary product offering. You strive to become a part of something bigger.
2. Pursue alternative channels
This strategy for business growth entails pursuing other ways to market and sell your products and services, including online.
Companies, such as Amazon and software developers use this approach, enabling customers to access their product offering conveniently.
This is an effective strategy to reach a large customer base, especially now when many people have access to the internet and smartphones.
To successfully implement this approach, you should conduct research to understand the demographics of the prospective business environment. These demographics include age, gender, income and occupation, ethnicity and religion, and family structure.
You should also analyze the target market’s distribution channels and foreign markets to learn new opportunities to pursue.
3. New product development
This business growth strategy entails developing and selling new products and services both to new and existing customers.
A company like Apple successfully implemented this strategy when it launched the iPod. This gadget performed well because it could be used separately from an Apple computer while exposing more buyers to other Apple devices.
Once customers begin to appreciate your product’s interface, they become open to trying out other offerings.
You can also build a sales funnel, a multi-modality process, which entails creating relationships and experiences with website visitors or prospective clients. Once they use your freebies and start trusting your idea, they convert into followers, brand ambassadors, and buyers.
Converting new leads into sales is an effective strategy to expand your business. Still, you should take one step at a time to caution your business against unexpected risks and uncertainties.
4. Market development
Expanding internationally is one of the strategies for business growth that established brands use to scale their existing offers.
Consider selling more of your current product or service to clients in another city, state, or country. You can use a franchising model, allowing you to provide services in multiple locations.
A franchise is a business where independent entrepreneurs use the rights of a more established company, such as a name, logo, or products, to operate independent retail outlets.
For instance, companies like McDonald’s, Dunkin, and Taco Bell, sell rights to license their companies, enabling franchisees to gain from brand recognition, years of experience, and popularity. You can use this business growth strategy, depending on the nature of your business.
Market development can be expensive and complex, but it can potentially earn your business massive profits.
You can grow your business more quickly by acquiring other firms.
You can start by researching and analyzing potential businesses in your industry or other sectors, which would complement your product or service offering.
You can buy a competing business (horizontal integrative growth strategy), a supplier (backward integrative growth strategy), or a business within your distribution chain (forward integrative growth strategy).
Companies, such as Intuit and Facebook, have used this approach to eliminate barriers to their future growth. Intuit has acquired competitors like Full Slate, Playbook HR, and Credit Karma while Facebook has acquired Instagram, Oculus Virtual Reality, and WhatsApp Messenger.
This approach can pave the way for your business to quickly access and sell new products and expand the market share.
Examples of business growth strategies
You can replicate some of the following practices of business growth in your company.
Dropbox is a cloud storage software that enables users to keep their files in the cloud easily and safely instead of using physical gadgets like USBs and external drives.
But how did a company launched in 2008 achieve such tremendous success, hitting a million registered users by April 2009?
It was through the power of viral loops.
This strategy requires you to market a product to a few users, whom you promise a reward or incentive if they accept and share the item with their network. You achieve growth as new users sign up for your product or service, and these and other subscribers keep sharing repeatedly.
WhatsApp borrows its success from a value proposition that sets it apart from the competition.
Since its inception in 2009, this messaging app has reached more than 2 billion active users worldwide.
To set it apart from other companies offering the same services, WhatsApp opted for zero ads and zero marketing, enabling the platform to gain many more users fed up with strategies employed by other providers.
To grow your business, you should understand what others in the market could be doing wrong. You can then come up with ways to either eliminate or improve their strategies.
Tinder has revolutionized online dating since 2013, enabling it to achieve $1.2 billion worth of revenues as of 2019.
The company’s business growth strategy is in-person outreach, contacting prospective members directly, handing out fliers, and demonstrating the app’s value to people on the streets and coffee shops.
Similarly, you can use word of mouth to interact with potential customers in your target market. You can hold or sponsor events or attend conferences pertaining to your area of specialization.
Successful businesses plan and work for growth.
They research and analyze the demographics of their target market to understand the processes, activities, and systems to put in place to drive their growth.
They understand their business and aspects to maximize to reach their goals.
As a business owner, you can use either of the growth strategies suggested in this article, including brand licensing, alternative channels, new product development, market development, and acquisition. You can also adopt other tested strategies like viral loops, value-adds, and in-person outreach (word-of-mouth marketing).
Intellini Consultants can help you on your journey to expand your business. Talk to us, and we’ll analyze your business goals, strengths, and market demographics to suggest the best growth strategy for your firm.