Most small companies have plans to grow their business and increase sales and profits. Broadly speaking, business growth strategies fall into three categories.
1. Acquisition
Buying a business, or segment of a business or buying a parcel of revenue. For an example, I might grow my accounting practice by buying a bundle of fees from another Accountant. Is this the best way to grow, or merely the quickest? Speaking from experience, buying a bundle of clients does not necessarily result in long term repeat or happy clients, however the revenue return on the initial investment could be instant but not always as there is also a risk that the purchase may not return revenue if the client decides to change before re-engaging.
Buying an established business may also seem like a good idea, however sound due diligence before committing is an essential part of the process, together with a practical strategy to transition the business. What you are buying when acquiring a business is pre-established customers, concept or processes, for your initial investment will you first see a revenue stream and secondly a return on your investment – or as the saying goes are you just buying yourself a job?
2. Marketing
Spending $10,000 on running an ad in the local paper for a company like Harvey Norman may be a drop in the ocean, yet for a small business paying $10,000 to run a newspaper ad will most certainly be a very expensive strategy to potentially attract a new customer. The idea behind advertising (marketing) is that you are trying to entice a sale, but so many factors need to align for the spend to be recouped.
While advertising and marketing is a way to grow, unless it is aimed at the right audience, the messaging is right and it is clear as to the problem your business can solve for the customer, it’s probably more of a brand awareness exercise than a growth strategy. Enticing a buyer/purchaser to spend money in your business can be done in multiple ways, strategies, and channels. If you have specialised knowledge in marketing, then you would know the tips and traps, if not then valuable resources could be wasted.
3. Development – Product and/or services
Developing a product and or services that is new, meets a need, and is easy to launch to your current customers is a growth strategy that is often overlooked. This activity is what is commonly referred to as ‘value adding’. You already have the customers, they are buying your widget, but you develop a complimentary product “Widget enhancer” which you can generate more revenue. Or it could be that you currently specialise in a market, but you wish to expand this market by diversifying into another secondary market. You could have a core business service that can be packaged into another service that could be sold for a higher price point. The focus with launching any new product and/or service is that the value is communicated and that the price point is attractive enough to again entice the sale.
Selecting the most appropriate strategy is often not that clear to business owners as they are so close to the business both emotional and financially, often clouding the brainstorming process. Having a trusted advisor who knows your business and personal circumstances can allow for objective and rational coaching for a clearer decision to emerge, or alternatively raise factors not been previously considered.
If you would like to talk growth strategies with us, feel free to book an appointment here.