Types of business growth
There are several ways you can achieve growth for your business, which can be broken down into four categories. You can use these categories to help assess how best to expand your business, helping to prevent wasted time and money:
Organic growth is when a company expands its operations to grow from within, rather than seeking external support. This type of growth is most commonly seen during the first stages of a new business, when a company relies on its own resources to start generating profit.
An example of organic growth is to enable a more efficient production process, allowing you to produce more product in a shorter period of time – encouraging increased sales. This approach relies on self-sufficiency and, while it’s a slower and more natural process, it helps avoid taking on debt. It also ensures you maintain total control of your company by avoiding a merger or acquisition. Businesses tend to adopt the organic growth approach in the hope of generating enough capital to invest in future strategic growth initiatives, which brings us onto…
Focusing on long term growth, this category tends to be a second stage approach for businesses that have reached the peak of their organic business growth stage and need to find additional markets. It’s all about developing initiatives that will help your business flourish in the long term. For example, a strategic approach could aim to reach an untapped audience through increased marketing, or expanding a product offering. Strategic growth typically requires money generated by organic growth – it will offer a gradual increase in sales (rather than fast acceleration from an injection of cash from external investment).
This strategy is all about optimising internal business processes to increase revenue. For example, could you explore automation tools that increase efficiency, while saving money on hiring more staff? This can be a challenging and time-consuming approach, but extremely effective in streamlining your processes and injecting efficiency for faster growth. It also ensures your business is utilising the best technology available to reach your business goals, helping to modernise and future-proof it.
4. Partnerships, mergers and acquisitions
Although riskier, this strategy offers big rewards. A well-executed merger or acquisition can help a business enter a new market, manufacture more products and gain the customer loyalty cultivated by another brand.
What growth strategies are particularly useful to small businesses?
These are just a few examples of the different types of growth strategies you can explore to meet your business goals. By ensuring you have a strategy in place, the funds to support it and the energy, determination and patience to put it into practice, then there’s no reason why your small business can’t achieve significant growth.
Increase market penetration
Considered by many as the most critical strategy that small businesses should use for long-term success, its aim is to increase your sales within your current market. Appealing to your current market is a reliable way to boost your profits, however the process can be difficult as it requires you to beat your competition. A tactic could be to lower your prices – selling for less than your competitors will help expand your customer base, and the increase in sales as a result can offset the loss you take when dropping your prices.
Charging customers lower rates, however, might not be viable as a small business. If you’re unable to lower your prices, consider other incentives such as appealing to customers’ love of bargains. Could you offer a new customer discount? Or offer a discount to those buying in bulk?
Focus on market segmentation
If you operate in a large market that has larger brands within it, you might need to re-evaluate where you see your brand within this market, and consider narrowing down who you’re targeting.
Market segmentation involves dividing a broader market into small groups based on demographic information or buying habits. By marketing to just one of these segments as your target audience, you can be more specific in your targeting, which is a lot easier than trying to be everything to everyone.
This strategy is also useful to businesses that offer more than one product, as the segmentation process helps you to advertise different items to different consumers. While the research process is time-consuming, the targeted activity per item that comes, as a result, can be a real game-changer.
This strategy involves marketing new products/services in your existing market to capture a larger share of the market. For example:
- Creating varieties of an existing product e.g. new flavour
- Updating features of a product to make it more beneficial g. making your software available online via cloud computing
- Introducing a new product line
- Bundling your services into different packages/tiers
Research alternative channels
New ways to sell your products = a great way to grow! With the internet providing countless new channels and tools for entrepreneurs to market their products effectively, it’s time to dive in and test them out. If your business is online-based, could you consider tapping into your local market in person via markets or a pop-up shop? Face-to-face connections are a great way for building customer loyalty and networking with other like-minded businesses that can support and promote each other. If you have a brick-and-mortar business, have you considered an online offering, to tap into a much wider audience? This strategy is worth consideration, particularly if you operate in an industry that’s highly competitive. Always be on the lookout for innovative ways to target other markets.
Nurture the right partnerships
By joining forces with another small business, you instantly achieve positive exposure to that business’s audience (and vice versa). Make sure to take time putting a shortlist together – you want to avoid any direct competitors for obvious reasons! Look for businesses that are complementary to yours, that appeal to a similar audience who would find your offering helpful or interesting.
For example, if you run a hair salon, are there local businesses that you could partner with to offer a local pampering experience with? Such as a nail salon, gym, restaurant? – A discounted package that benefits both local businesses and the community? Additionally, a fruitful partnership could involve combining resources to tackle a big project, skill share, develop a new product or host an event to promote both brands.
Did you know that it costs five times as much to attract a new customer, than to keep an existing one? By retaining your customers and building a loyal relationship with them, you can avoid expensive customer acquisition costs. Can you believe that 44% of companies have a greater focus on customer acquisition compared to 18% that focus on retention?
Prioritising new customers over existing ones can be a devastating mistake. While expanding your customer base is important, the key to success really lies with customer retention and loyalty. Your profits can be significantly increased by retaining your customers, especially if happy clients quickly become a source of word-of-mouth marketing.
Email marketing is also an effective way for staying in touch with customers. Offer an incentive for signing up to your mailing list, e.g. 10% off your next order. You’ll then have a channel of communication for you to send company updates and information that might interest them.
Another effective way to build a loyal customer base is to ask for feedback via reviews and surveys. It shows you value customer opinion and are prioritising their enjoyment and experience of your product/service.
Test and refine your online marketing strategy to better connect with your target audience. A total of 5.03 billion people around the world use the internet, which is equivalent to 63.1% of the world’s total population. Online marketing is a powerful growth tool when you get it right. Ask yourself:
- Do you have an engaging website that’s user and device-friendly?
- Is your website easy to find via search engines?
- Have you set up your Google Business profile, so people can find you in Google Search, and Maps?
- Are you encouraging engagement via social media?
- Are you active on review sites?
- As mentioned above, are you staying in touch with existing customers via email marketing?