How Can You Grow Your Business?
Without continual growth and progress, such words as improvement, and success have no meaning.
—Benjamin Franklin
Growing a business is undoubtedly an exciting part of the entrepreneurial adventure. A business that has solid foundations, is being well received by customers and is making a profit is in a great position to grow. Getting to that position is a big achievement.
Even if in the early stages the expanding isn’t a key priority, it is important to give your business the best chance of thriving, because if it is thriving it has the best opportunity to stay successful and gives the best foundation for growth.
To have a thriving business, you should always look at the following principles:
1. Get to know and understand what your customers want. Ultimately, your business will be looking to provide a product or service that solves a customer’s problem. You can gain important insight from your customers by offering a personalized service and asking for feedback.
2. Offer great customer service. Exceptional customer service and going the extra mile is vital to retain customers, to get referrals, and to attract new customers. Making the customer service journey smooth and pleasant will be remembered (equally a poor customer service will also not be forgotten).
3. Always look for new customers (but don’t forget your existing ones!). Attracting new customers is important, and this can be done via special offers or some sort of price reduction. However, it is important to balance this with looking after your long-standing customers.
4. Look at and measure what works and adapt where necessary. It is worthwhile to review progress at set intervals and measure progress. This is a time where the business plan can be referred back to for clarification. Whether you are ahead of your plan, a bit behind, or on track, if you need to adapt your ways of working to improve, then do so. If a certain of your business can be improved, then in any case it is best to do that at the earliest opportunity.
There are a number of different definitions of business growth. This gives an insight into how a business can grow.
• Organic growth: This is the most common (and some may say effective) means of growing a business. This type of growth needs a business to focus on producing more products and services for success. A focus on organic growth may mean a business will acquire more space, for example, a larger office or expanding shifts to produce more product. A business that is growing organically literally needs to expand to cope with increased demand. This is a solid growth strategy for new businesses and for a business that is new to the market and faces a shortage in product.
• Strategic business growth: This is a longer term growth strategy that follows on when the potential for organic growth has reached its limit. A strategic growth approach may be to reach a previously untapped market through a new product or through increased advertising. This growth strategy requires money that can be generated through organic growth and strategic growth that will be achieved by a gradual increase in sales. This strategy allows a business to focus on long-term growth goals and use saved or stored capital to achieve this objective.
• Partnership/acquisition/merger: Some types of business can be suitable for this type of growth. It can produce some unique benefits and opportunities for expansion. However, this is one of the riskier paths to growth despite offering a lot of potential success. A well-planned merger or acquisition can open doors to new markets, help to manufacture more products, broaden skills and expertise within the business, and gain customer loyalty that has been cultivated from the other brand. However, this type of arrangement can lead to complications; two separate entities coming together are not always straightforward and wherever possible any issues should be ironed out before signing any agreement.
• Rapid business growth: This type of business growth occurs when growth is needed in a short period of time and rapid growth is the only option. A prospect for rapid growth could arise due to an unexpected opportunity. This usually means a rapid increase in production and/or staffing levels, and this will lead to certain challenges and risks. Customer service issues, operational efficiency issues, outgrowing premises, and shortfalls in cash flow can occur with this type of business growth. As the growth rate increases, your cash will go out of the business and costs will increase as well, and if this happens too quickly, this can spiral out of control and the financial solvency of the business could be put at risk.
Timing is important when deciding to go ahead with expansion, and there are some criteria to hit before making considering and making the decision to expand. These indicators will show whether you are at the best point to consider growth:
1. Having regular customers: A positive flow of customers is very important. Before deciding to expand, you definitely want to have a steady (ideally increasing) flow of customers. Repeat customers also give your business stability. All of these factors show that there is continued demand for your product or service.
2. There is customer demand for growth: If your customers are asking more of your product or service, or increased opening hours, then that is a good gauge to look at expansion.
3. You have a positive balance sheet and regular profits: If this is the case and is showing over a relatively long period of time (or at the very least heading in the right direction), this shows that you have a healthy balance sheet and that your business could be ready for growth.
4. Your industry is growing: It tends to be easier to grow your business if you are in an industry that is growing. Similarly, you may want to think again if your industry is standing still or shrinking. (It is not impossible to grow in these circumstances, but there is likely to be more pitfalls in a stagnant or shrinking market.)
5. Your current business cannot handle the demand (or is getting close to that point): If you are in this position, then there is sufficient demand for thinking about getting larger premises, opening new premises, or taking on extra staff.
These criteria are each very important, and all need to be considered before deciding to go ahead with growth. You need to ensure that your business is ready to grow. If you go too soon, the business may not survive.
If possible, it is worth waiting to ensure you are ready as this minimizes risk. If you are patient and go for it at the right time, you will maximize your chances of growing successfully.
When you feel you have considered and met the criteria for growth and you are thinking you and your business is ready, then growth can be a feasible and exciting option.
However, growing a business can be daunting, particularly if it is new to you. If your business plan includes a plan for growth, then it is worth referring back to it at this stage. However, if growth was not part of the original plan, it can be updated and your plan for growth can be added in. Either way, having this to refer back to and to measure progress, will be helpful.
How you expand will to some extent depend on circumstances, and some business models can be more straightforward to expand than others. But having a plan is vital as there are many things that can potentially go wrong.
To successfully grow your business, then the following broad principles should be considered:
1. Retain and recapture existing customers: While attracting new customers is always likely to be beneficial and is never a bad approach, it isn’t the only way to grow. In some cases, the retention and recapture of current customers is the best bet for increasing sales. Customers who have bought a product or used a service once are likely to do so again if they have a positive customer experience. Marketing and data capture of shopping habits is important here and can be used to convert one time customers into repeat customers.
2. Actively ask for referrals: You can’t just assume that customers are spreading the word about your business. (They may well be, but an assumption is hard to measure and plan against.) Your current customers are already in your target market, so it is fair to suggest that their work and/or social circles are also part of your target market. Depending on the type and size of your business, you can incentivize referrals with a discount code or ask customers to tag or share your brand on social media channels.
3. Manage, monitor, and contain your costs carefully: When expanding, it is vital to keep an eye on costs. Ultimately, if your business expands and your costs increase too much, then this can lead to not having enough money left to invest to make a profit. So, when you are looking at growing, pay attention to how much it costs to run the business and how much it costs to deliver products or services to customers. You can cut costs by removing low-performing products or services and by improving marketing to improve inventory turnover. However, there is a balance to be struck here. While costs always need to be managed, don’t cut costs in a way that will detrimentally impact your employees or customers. That may lead to increased cash flow in the short term, but in the medium and long term, it is likely to damage your business and as a result its potential to grow.
4. Expand and extend your market reach: There are many ways of doing this depending on the type of business. For example, open new premises in different locations or have an online shop, targeting a new demographic via market research and social media and by showcasing new uses and benefits of your product or service. Any and all of these approaches will help increase market share. This will lead to increased sales and stabilize the business model. In any case, having more than one type of customer is beneficial as it will make your business more resilient to market changes.
5. Network: There are many different available options to network in an effective way, via events and social media (this is covered in more detail in Chapter 7), and is another way to build positive relationships, meet new people and “spread the word” about your business. Networking can lead to new customers and clients as well as useful relationships with other business owners who may be able to help your business in some way. This can open doors to new opportunities, new markets, and opportunities to collaborate.
6. Be diverse with your products or services: Broadly speaking, this can be done in two ways. Firstly, by focusing on the products or services that you already sell that address the needs of the customers you already have. Or secondly, by focusing on new markets that have similar needs and characteristics to those of your current customers. Both approaches can be done in a gradual way allowing for diversification of products and reaching new customers without overextending the business.
7. Consider exporting to international markets (this is covered in more detail in Chapter 13): This approach means reaching a potentially large number of customers in diverse geographic locations outside of the domestic market. However, this approach will always need a lot of time and resources. This can be complex as different countries have different trading laws and regulations. There may also be additional licenses that are needed to trade between certain countries as well as various regulations regarding different products, as well as the possibility of additional paperwork such as work permits. If you have the time and resources, there is no doubt that exporting will give access to previously inaccessible markets and that will create huge opportunities for growth.
It is key to choose the right growth strategy that will suit your business. Every business is unique and will be at different stages of development and that will be key to any decision that needs to be made. Not all growth strategies will suit every business or appeal to every business owner.
While any strategy will not necessarily lead to growth straight away, if the plan is implemented consistently and systematically, there will be positive progress. And if that strategy doesn’t work for whatever reason, be prepared to step back, honestly analyze what the issues were, and make a new plan to go again.
Growth cannot come by taking the easy way.
—Paul V. Johnson