Ask any small business owner what they hope to achieve and the answer will almost always include growth. Business growth is something that everybody wants but many businesses fail to achieve. One reason that they may fall short of the mark is because they choose the wrong business growth strategy.
Select Funding provides affordable financing to small businesses to help them achieve their goals. We understand that business growth can take many forms and choosing the right strategy is essential. Here are six types of business growth plus some tips on how to choose the best strategy for your business.
What Are the Stages of Business Growth?
Business growth occurs in stages that are common but not inevitable. Some companies may skip a stage while others may pass through every stage in order. Here are the five stages of business growth.
Stage 1: Existence
The existence phase occurs in the early stages of a company’s life when there are more questions than answers. Companies in this stage are typically brand new and may not have a formal internal structure or established customers. Here are some of the questions that typify the existence phase.
- Is there enough money to pay for overhead expenses?
- Can we attract enough customers and manufacture enough products to become viable?
- Does the business have the potential to expand to a broader sales base?
At this stage, it’s common for the business owner to be hands-on in every area of the business, directly supervising employees and overseeing operations. Outsourcing and hiring may not be possible until there is enough money coming in to pay for them.
Stage 2: Survival
In reaching the survival stage of growth, a business has proven that it is a workable entity and has a solid, if small, base of customers and sales. There may still be issues with reliable cash flow and concerns about breaking even. Here are some questions that may occupy business owners at this stage.
- Are we generating enough cash to break even?
- Will we have the capital to acquire or repair business assets as they wear out?
- Can we obtain financing to help us achieve our growth goals?
The business owner may still be heavily involved in day-to-day operations at this stage, but may also have hired an office manager to oversee certain aspects of the business. Some companies stay in survival mode for years.
Stage 3: Success
At the success stage, most companies have settled into a pattern of sustainable growth, meaning that they are generating enough revenue to pay for overhead expenses and some incidentals without having to worry about cash flow. Here are some questions to consider at this stage.
- Am I content with the way things are with sustainable growth and comfortable revenue?
- Do I still have growth goals that would require a new strategy?
- Do I have the human resources in place to pursue accelerated growth?
There is less risk involved with staying in the success phase than there is with trying to move beyond it. If you opt for faster growth, you’ll need to put every resource you have behind your effort. There are many companies that stay in the success phase for years or even decades because they lack the resources or desire to pursue more rapid growth.
Stage 4: Take-Off
Any business owner who wants to push beyond the success stage and accelerate growth will need to do so with careful consideration of the following questions.
- Am I able to delegate tasks to experienced team members, so I can focus on growth opportunities?
- Is there enough cash flow to pay for the resources needed for growth?
- Is the company structured in such a way to support scaling the business?
That final question is a crucial one. You may need to take a step back and address issues that could get in the way of scaling. For example, you might want to map business processes and automate as many as possible, hire new skilled employees, or double-check that your manufacturing and logistics are equipped to deal with a significant increase in sales.
Stage 5: Maturity
If your growth strategy is successful, then the final stage is maturity. It’s at this point that your company should have the resources (both financial and human) to develop long-term strategies and goals. Here are some questions to consider when you reach maturity.
- Does the company have the ability to manage financial gains obtained during the take-off phase?
- Is the existing management structure working or does it need to be revamped?
- What can we do to maintain flexibility as we continue to grow?
As we mentioned earlier, not every company will achieve every stage of growth. However, it’s still instructive to know what these stages are and how to recognize them.
6 Types of Business Growth Strategies to Consider
Depending on what type of business you own, which sector you’re in, and economic conditions in the country and the world, you can choose a business growth strategy that’s most likely to get you the results you want. Here are six growth strategies to consider.
#1: Market Development
If your business is new or has made small inroads by selling to customers in one market, then market development (or market penetration) may be an effective growth strategy. It involves selling your products to more potential customers in your existing market or expanding into a new market to attract new customers. In either case, you’ll need to invest in brand recognition and paid advertising to achieve your goals.
#2: Market Disruption
Market disruption is a strategy that’s useful for both new and established businesses who have something different to offer. It involves moving into a new market and (you guessed it) disrupting it by doing something in a new way. Some examples of disruptive growth include providing a product that hasn’t been seen before, providing a familiar product in a new way, or using a new business model.
#3: Product Expansion
Adding new products to your existing offerings is an effective strategy to grow your company. It can apply in an array of industries, too. For example, a restaurant could use product expansion by opening its doors for breakfast. Products may be entirely new or be inspired by your existing products. For example, a footwear manufacturer could implement product expansion by adding other apparel items.
#4: New Channels
Moving into new distribution channels can help your company grow. For example, a diner that previously offered only sit-down service could start offering take-out options, as well. Or, a brick-and-mortar store could open an e-Store (or vice versa) to attract a new audience and increase sales. You may choose to pursue one new channel or several using this strategy.
#5: Organic Growth
Organic growth relies on unpaid marketing tactics to attract new customers and increase sales. Some examples might include a social media marketing campaign or a customer referral program, where existing customers get incentives to refer their friends and family to you.
#6: Acquisition
Acquisition offers the prospect of rapid growth but it requires a carefully planned strategy and plenty of resources to pay for acquisitions. Acquiring another company can help you add new products or expand into new markets but you’ll need the right investing or financing partners to provide you with the capital to implement this strategy.
Tips for Choosing a Business Growth Strategy for Your Company
Now that you understand some of the most common types of business growth, here are some pointers to help you choose the right business growth strategy for your company.
- Take inventory of your assets. An important first step is to know what you have and how it can help you grow. We suggest starting with an inventory of your assets, including human resources, raw materials, equipment, cash flow, and credit, that is, your ability to obtain financing to fund your growth goals.
- Set your growth goals. Before you choose a strategy, you should think about what it is you hope to achieve. An aggressive goal might require a different strategy than a more modest goal.
- List your needs for each goal. What will you need to achieve the goals on your list? If your goal is to develop new products, you’ll need money for R & D and you may also need new employees.
- Map your business. Business mapping provides a high-level overview of your business and its goals and it can be helpful for any growth strategy. Your map should include the specific elements of your growth plan and who will be responsible for each element. (Keep in mind that your map should be flexible, so you can update it to address your company’s changing needs.)
After you know what you have, what you want to accomplish, and what you need to accomplish it, you can review the growth strategies and choose the one that’s best suited to your business goals. For example, if you know you want to develop new products, you might choose either the Acquisition strategy or the Market Disruption strategy.
Choose the Right Growth Strategy for Your Business
If you want to grow your business, you’ll need to consider where you are and where you want to go. Taking the time to conduct market research, evaluate your existing assets, and predict what you’ll need to achieve your goals will increase your chances of success.
Are you in need of small business financing to help you pursue your growth goals? Select Funding can help! Click here to read about our small business financing options and submit an application today.
