- January 26, 2014
- Posted by: Treadstone Management Partners
- Category: Marketing & Sales, Strategy
Growth Strategies for Your Business
Turning a small business into a big one is never easy. Statistics paint a very dire picture. In fact, research suggests that 0.001% of companies will ever reach $250 million in annual revenue, and only 0.00036% will ever reach sales of $1 billion.
Most businesses start small and stay small. However, that doesn’t have to be the case for every business. There are examples of businesses going from start-up to small business to a fully-thriving large business. But what do business owners have to do to rises above the odds and create a company that is successful and resilient. How can business owners create a breakthrough company?
What follows are some guidelines on how to develop a growth strategy for your business.
Intensive Growth Strategies
The foundation of developing a growth strategy is balancing the relationship between inputs and outputs. An efficient growth strategy brings you the most results from the least amount of effort and risk. This isn’t as easy as it sounds. Growth strategies resemble a fruit tree. The low lying fruit presents less risk but may be less quick impact growth. The focus for businesses is to start with the low lying fruit and climb your way up.
 Market Penetration
The least risky strategy is to sell more of the current product to the current customers. This is a growth strategy perfected my large consumer goods companies. Think of the mix of beverage products. Companies offer the six-pack, the 12-pack and the case. You can’t buy toilet paper in less than a 24-pack. Another form of market penetration is finding new ways to use your product, like using baking soda as a deodorizer for your refrigerator.
 Market Development
The next stage for developing a growth strategy is market development. Market development is devising a way to sell more of your current product to an adjacent market. An example would be to offer your product in new cities or provinces. Many of the fast growing companies of the previous few decades relied on market development as their main growth strategy.
 Alternative Channels
This growth strategy involves pursuing customers through channels otherwise neglected by your business. An example would be pursuing customers online as opposed to exclusively brick and mortar sales. Using the internet as a means for your customers to access your products or services in a new way is an example of this growth strategy. When Apple expanded its business model to include retail outlets, it was pursuing an Alternative Channels growth strategy. The more channels your business has, the more avenues it has to reach your customers, the more sales you can make.
 Product Development
A classic strategy, it involves developing new products to sell to your existing customers as well as to new ones. If you have a choice, you would ideally like to sell your new products to existing customers. That’s because selling products to your existing customers is far less risky than having to learn a new product and market at the same time.
 New Products for New Customers
Sometimes, market conditions dictate that you must create new products for new customers, as Polaris, the recreational vehicle manufacturer in Minneapolis found out. For years, the company produced only snowmobiles. Then, after several mild winters, the company was in dire straits. Fortunately, it developed a wildly-successful series of four-wheel all-terrain vehicles, opening up an entirely new market. Similarly, Apple pulled off this strategy when it introduced the iPod. What made the iPod such a breakthrough product was that it could be sold alone, independent of an Apple computer, but, at the same time, it also helped expose more new customers to the computers Apple offered. The iPhone has had a similar impact; once customers began to enjoy the look and feel of the product’s interface, they opened themselves up to buying other Apple products.
Integrated Growth Strategies
If you’ve exhausted all steps along the Intensive Growth Strategy path, you can then consider growth through acquisition or Integrative Growth Strategies. The problem is that some 75 percent of all acquisitions fail to deliver on the value or efficiencies that were predicted for them. In some cases, a merger can end in total disaster, as in the case of the AOL-Time Warner deal. Nevertheless, there are three viable alternatives when it comes to an implementing an Integrative Growth Strategy.
This growth strategy would involve buying a competing business or businesses. Employing such a strategy not only adds to your company’s growth, it also eliminates another barrier standing in your way of future growth—namely, a real or potential competitor. Many breakthrough companies such as Paychex, the payroll processing company, and Intuit, the maker of personal and small business tax and accounting software, acquired key competitors over the years as both a shortcut to product development and as a way to increase their share of the market.
A backward integrative growth strategy would involve buying one of your suppliers as a way to better control your supply chain. Doing so could help you to develop new products faster and potentially more cheaply. For instance, Fastenal, a company based in Winona, Minnesota that sells nuts and bolts (among other things), made the decision to acquire several tool and die makers as a way to introduce custom-part manufacturing capabilities to its larger clients.
Acquisitions can also be focused on buying component companies that are part of your distribution chain. For instance, if you were a garment manufacturer like Chicos, which is based in Fort Myers, Florida, you could begin buying up retail stores as a means to pushing your product at the expense of your competition.