How and When to Grow Your Business
Many small business owners begin their operations with an eye toward future growth. While they project that in three, five, or ten years they may desire to expand their business or business model, the best way in which to accomplish that goal isn’t always clear. Some companies may be best served by adding a second location, while others may need to hire additional personnel or even license their products to third parties. What constitutes “growth” is largely dependent on your industry and goals.
Having an articulated set of goals for your business is important. Those goals can help you to create an organized growth plan that can help to set you on the path to operational success. At the same time, it’s imperative to listen to market feedback. Knowing when to change course can help to spare you a headache or two. For example, if your goal is to open another location, but you aren’t receiving a sufficient volume of traffic to justify the additional rent, then taking a thorough look at your numbers and surveying your customers may serve to highlight other potential avenues for growth. Extending your hours may result in greater traffic, as might carrying more products or hiring another employee. Keeping your thumb on the pulse of your business and on your customers’ desires can help you to determine the best course of action going forward.
Growth Plan
Thinking ahead and creating a formalized growth plan will almost certainly help you to avoid some growing pains. While events will likely not all go according to plan, having a growth plan in place gives you a framework on which to base your future actions. Consider it to be a flexible document and always be prepared to alter it as required by evolving circumstances.
Your growth plan should focus on how you plan to grow your business. I’ll be covering the following methods in this article: market penetration, market development, alternative channels, product development, and new products.
Knowing When it’s Time for Growth (Welfont Joe Johnson)
Your Market Can Handle It
Do you understand your market? If you’re selling pastries and are considering the addition of a new location, you should also attempt to quantify the exact makeup and source of your customer base, as well as how many orders you’re receiving on average.
You’re Maxed Out
If it feels as though you can’t keep up with demand, it may be time to grow your business. How you accomplish that task depends on your goals and sales volume. Hiring another person to man the counter at your bakery may help to fill your need, though adding a second location on the other side of town may serve to increase your overall customer base while also enabling you to reach customers where they’re located.
People are Seeking You Out
If you have a steady stream of business, that’s great! If you’re attracting customers or clients with little advertising, that’s a good sign that you’re connecting with your audience and that you have something they desire. Ensure that you can keep pace with demand and investigate how you might best manage growth so as to maximize potential.
Check for Current Inefficiencies and Missed Opportunities
Before attempting expansion or hiring extra help, spend the time to look for holes in your current operation. Are there things that you and your team could be doing better? Could improved processes increase your revenue without additional expenditure? It’s important to periodically examine how your established processes are being followed in order to determine their effectiveness. If you wish to facilitate healthy growth, you should have scalable processes in place that will allow for increased production. If you plan to acquire another business, how will you inculcate your existing company culture into the new business? These considerations should all be thoroughly explored prior to making the commitment to expand.
Check the Tech
Sometimes outdated technology can slow us down. I can think of some major retailers who were late to enter the online market or who utilized outdated tech for their point-of-sale (POS) systems. They each suffered as a direct result of their unwillingness to invest in technology or their inability to foresee the extent of the upcoming sea change. On the other hand, other companies have benefitted from their desire to stay on top of the latest technologies, thereby ensuring that their processes are up-to-date and that they continue to meet their customers’ evolving needs.
Methods of Growth
Market Penetration
How much of your market are you currently claiming? Investing in the ability to reach more of your target market can have a positive result on your revenues.
Likewise, increasing sales to your current customers can directly facilitate the growth of your bottom line. This can be achieved via cross-selling and up-selling, as well as by carrying more products in which your current customers are interested. Accessories, for example, can be an excellent source of additional profits. If you’re selling flooring to DIY-ers, having the tools and hardware they need for installations on-hand can serve to increase your average sale. Maintaining an inventory of cleaning and maintenance products will likely encourage shoppers to add those items to their carts. Salespeople trained both to share the benefits of specific items and to cross-sell products can also increase the likelihood (and size!) of customer purchases.
Training cashiers to inquire whether customers might like to add warranty protection to a tool purchase (or a special cleaner to a flooring purchase, etc.) can also serve to increase revenues.
Market Development
If you’ve cornered the market in your geographic area, it might be time to find a new market elsewhere. A local business which offers dry cleaning and linen delivery for restaurants might look to restaurants in another town or city. A national tech company might seek to expand their operation to Canada. Market research can help you to develop a plan to successfully enter a new market.
Alternative Channels
Suppose that you have a real estate agency. Most of your focus is on selling properties and helping clients to find their ideal homes. While you could hire another agent to help you manage more sales, another alternative might be to purchase an appraisal or remodeling company. Many businesses which maintain synergistic relationships with other companies can achieve the growth they desire (and sometimes even save money) by purchasing another company in their sector. For example, a grocery chain that purchases a food distributor will be able to reduce their costs while growing their business reach. Not only will they receive their products at a discount, but they’ll earn additional money by distributing those products to other resellers.
Product Development
A product that doesn’t change has little room for growth. However, making improvements and integrating customer feedback presents an opportunity to increase sales. Evolving your current product or developing new products aimed at your current target audience can both help to increase revenues while still focusing on the same market segment.
New Products for New Customers
No one product will be suitable for everyone. However, it may provide insight into consumers’ needs or desires. Developing new products to target another set of potential customers can help you to grow both your reach and your business. Apple, for example, consistently expands their offerings over time and, while some of their products continue to appeal to their original target audience, each new product tends to increase their ability to reach new markets. Those individuals who purchased iPods were not necessarily the same consumers who bought iMacs. iPhones and iPads have continued this trend, each serving to broaden their overall market base.
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