Approaches To Growth
Your business will survive, grow and flourish by selling more to more people. This may just be your existing products or services and existing customers. It can also be new products or services or new customers or markets. The framework presented here is designed to help you think about growing your business. It covers
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Why growth is important to your business.
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What options for growth are available to you.
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Links to more specific information and step-by-step guides to help you to decide what you want to do and to achieve it.
The more specific information and step-by-step guides include:
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A diagnostics questionnaire to help find out for yourself which of the 3 approaches to growth is best suited to your business and for you to focus on.
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More detailed information and practical tips on each of the 3 approaches to growth for you to explore at your leisure.
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A series of '10 minute' step-by-step guides on techniques for achieving growth. Each guide is designed to take about 10 minutes to read through and to provide an outcome for your business.
Which are you?
ABC Ltd is a small retail business with a number of outlets. It has a staff of 55. The owner took over the business started by his father. In the last 20 years sales have been standing still. The owner would like to see the business growing again but does not know how to go about it. He has come to terms with the status quo.
XYZ Ltd is a young service business with 4 partners and 2 support staff. The partners are keen to expand the business but are really not sure whether they should be putting their limited business development resources into the ?product? or into getting new customers. They are trying to do a bit of both but are not achieving their target for growth.
These simple examples illustrate the problems commonly faced by small businesses.
ABC Ltd, far from not growing, is actually shrinking as competitors take his customers and inflation erodes the value of his business. Even if a business wants to stand still it has to 'grow':
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To cover rising costs and retain the value of the business.
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To replace customers who go to the competition or simply stop buying from them.
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To replace the products or services that become uncompetitive or obsolete.
XYZ Ltd is not focussing its limited resources and is trying to do too much at once. Between them, the 4 partners may be able to find say 2-3 man/days a week for business development activities. This might have to cover talking to prospective customers, developing new services and dealing with a marketing agency that is developing a website and other communications materials. Needless to say, not all this is going to be done well in the time. The moral is to focus on those activities that are going to yield the best results fastest and that the business can afford.
What do you want to do?
Before you start selecting options for growth or planning your growth, it pays make sure you are clear on what you want to do. Here are 3 questions that will provide a valuable foundation for whichever approach you ultimately decide to adopt.
1. What has triggered you to think about growth now?
Small businesses managers do think about how they should grow their businesses. However, this is something that happens when they are less busy satisfying orders or sorting out other problems. Usually something forces them to think about growth. In your case, it may be one of the following:
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A plan for growth is needed - Your bank manager wants a business or marketing plan to support your cash flow forecasts or request for an overdraft.
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Loss of sales - You have recently lost one or more key customers to competitors.
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Resource allocation - You have thought about developing a new product or service but are not sure it is the best use of resources.
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Under-used capacity - You have bought 2 new specialist machines when you needed1½. You therefore need to find orders to increase utilisation.
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You have to achieve your objectives - You want to grow and have been thinking about it for a while but now is the time to do something about it.
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Scatter-gunning - You have tried a range of ideas or attempts but none has really worked out, perhaps because you have been trying to do too much at once.
2. What business are you in?
The foundation for growth is to understand what business you are in. For example, if you are a hotel, the route to growth you may adopt will depend on how you see the business:
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You think you are ?
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So you invest in ?
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? providing food and accommodation
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? Dividing up the larger rooms into smaller ones to get more people in
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? providing holidays
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? Developing and promoting one and two week holiday ?products?
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? providing leisure breaks
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? Advertising in magazines
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? providing facilities for training events
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? Employing a sales person to sell the facilities to companies and organisations
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? enhancing personal well-being
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? Arranging with local beauty therapists, aromotherapists and masseuses to provide treatments in the hotel for guests
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This will help you to appeal to a defined set of customers who will find your offer attractive and credible. When you have defined this, it helps to write it down as a mission statement to communicate to your customers and motivate your staff.
For a 10-minute step-by-step guide to understanding what business you are in and writing your mission statement, take a look at our '10-minute Mission Statement'.
3. Which of your business capabilities do you want to exploit?
There are broadly 2 ways to grow a business:
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To go out and find a market opportunity, then establish and organise a business to satisfy that opportunity. This is fine for an entrepreneur with good ideas and resources to invest.
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To understand the capabilities and limitations of an existing business and to go out and find an opportunity that matches those capabilities. This is a more effective approach for most small businesses that are already up and running with resources that have distinct capabilities.
The important point for you is to identify what your business is good at and to build on that. It?s all too easy to believe your own sales literature but your customers may think you are good at something else. Why not ask them? They will soon tell you.
What options for growth are available to you?
There are 4 main approaches available to you for growing your business.
Products/services
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Existing
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New
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Existing
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Growth through existing customers
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Growth through new products and service
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New
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Growth through new customers and markets
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Growth through diversification
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Customers
1. Growth through existing customers ? increasing sales to existing customers by selling them more.
You can do this by:
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Selling existing customers more of what you are already selling them.
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Selling them other products or services in your range.
It also means trying to find other customers like your existing customers. For example, if you are selling industrial machines to 6 major customers in the automotive industry, finding other customers like these in the automotive industry would fall into this category. The logic here is that you are trying to sell more to customers whose needs are similar and who tend to buy in the same way. Strictly speaking, the wording of this approach to growth should be growth through existing types of customers. This approach tends to yield a short term payback.
For more information and on exploring ideas on this approach to growth, take a look at 'Grow through existing customers'.
2. Growth through new customers or markets - This means one of two things:
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Increasing sales through new (types of) customers. For example, your industrial machines may be equally useful to say the aerospace industry or the railway industry but they use the machines in a slightly different way and buy differently.
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Entering new geographic markets. These markets can be other regions within a national market or other national markets. Your target customers are likely to like the customers in your existing market(s). Of course you can look to serve new customers in new markets but this means that you have to do two new things at once, increasing your risk.
This approach has a significant number of unknowns and generally requires more investment, which has a medium term payback.
For more information on growth through new (types of) customers or new markets, or just exploring ideas on this approach to growth, see ?Grow Through New Customers?.
3. Growth through new products or services ? developing and offering new products or services, usually to your existing customers first to minimise your risk.
The trick here is not necessarily to create completely new products or services but to repackage or modify your existing products or services if possible. This again minimises your risk. Of course, if your existing products and services are becoming uncompetitive or obsolete, then you may need to consider completely new ones.
This approach usually has a significant number of unknowns, especially if you are creating a completely new products or service. It generally requires significant investment and has a medium to long-term payback.
For more information on this and exploring ideas on this approach to growth take a look at ?Growth through new products?.
4. Growth through diversification ? developing new products or services and offering them to new customers.
This is usually a high risk approach and one to be considered only when:
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You cannot meet your objectives for growth through the other 3 approaches.
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You have exhausted all potential for growth through the other 3 approaches.
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You are looking for a genuinely new and innovative approach to growth AND you have the capital to invest and resources to carry the work through.
Most smaller businesses still have much potential for growth in the other 3 approaches which carry far lower risk. We are not providing specific information or thoughts on this approach. But, for firms that have to consider diversification as an approach, they should apply simultaneously the principles growth through new products or services and growth through new customers or markets.
As you may have gathered, risk increases as you come down this list. This has implications for the approach you choose for your business.
More information and techniques
If you know which approach is the one you want to pursue for your business, or are just looking for ideas on ways to grow your business, look at the items below:
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Growth through existing customers please (see 'Grow Through Existing Customers' briefing).
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Growth through new customers and markets (see the 'Grow Through New Customers' briefing).
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Growth through new products and services (see the 'Grow Through New Products' briefing).
If you are ready to get on with formal marketing planning and want a framework for and some tips on marketing plans, there is a Marketing Planning tool available and this can be found in the CIM Book Shop.