There are many reasons why having a growth plan is beneficial to your business, especially in tough economic circumstances. You can be sure that your competitors will be looking to obtain your customers or your share of the market, and in the absence of a growth plan, many businesses suffer from severe knock-on effects that impact revenue growth. Building and sharing a growth plan with your team and external advisors ensures that you are sprinting in the correct direction of customer segments that most value your offerings.
Here are some issues that lack of a growth plan leads to:
- delaying your growth;
- wasted efforts;
- no Sensible Target;
- lack of Accountability;
- no New Thinking;
- poor Execution;
- intense Competition; and
- lack of Learning from Execution.
Before attempting to expand your business, you need to take time to document your growth strategy. With a well-thought-out and documented strategy in place, you can ensure that your business growth is led by informed decisions, thereby avoiding surprise pitfalls that compromise profits.
What is a growth strategy?
In the simplest sense, a growth strategy is a document that details your business goals and defines your strategies for meeting those goals. It’s a road map detailing the goals you’re striving to meet, how you’re planning to meet them, and when you’re planning to execute.
The most effective strategies are documented so that they can be shared across the organization. Having a documented strategy creates cohesiveness, allowing decisions and initiatives across the company to be catered to established goals. While initial planning is crucial, iterative planning is important as well. By revisiting your strategy at regular intervals, you can make strategic shifts based on new information, market changes and historical data.
[READ MORE: Steps to investing]
Business growth strategies
There are many ways to grow a business. Which way you choose to expand largely depends on your ambition, your reasons for growth, and the opportunities and resources available. However, two crucial factors for choosing a business growth strategy exist. They are:
- Products – what you currently offer, and what you’d like to offer in the future
- Markets – where you currently sell, and where you’d like to sell in the future
Based on these factors, strategic tools—such as the Ansoff matrix—suggest four main types of business growth strategies.
What are the four major growth strategies?
In the simplest terms, there are four possible strategies for growth, each with its own distinct risks. These are:
- market penetration;
- product development;
- market development; and
- diversification.
With market penetration, you try to sell more of the same things to the same market. The risks are usually low as you focus on capturing a bigger share of your current market with the products you already have.
Market penetration tactics
To devise a good market penetration strategy, you must have a successful product and a detailed knowledge of your market. You must also thoroughly understand your competitors.
You can usually achieve market penetration in four ways. You can:
- increase the market share of current products;
- increase usage by existing customers;
- dominate growth markets; and
- drive out competitors from a saturated market.
Product development
With product development, you are introducing a new product into your existing market. You’re effectively selling something different to the same customer, potentially encountering greater risks. With product development, a business usually has one of three choices. You can:
- create an entirely new product;
- evolve your existing product for its existing market; and
- enhance your existing product to introduce it to new markets.
Market development
Another option is market development, where you try to sell an existing product in a brand new market. For example, you may want to segment your existing market or reposition your product in it or target an entirely different geographical area. Market development is a growth strategy that involves selling your existing products or services to a new group of customers. It begins with market research where you:
- carry out a segmentation analysis of your existing market; and
- shortlist those market segments which you feel you should pursue.
Key market development strategies you could consider focus on:
- Pricing: You could implement competitive price structures with offers and discounts or, to command a higher price, provide a product with more value than the competitor’s.
- Distribution: You could develop new channels to reach target customers, e.g. sell online if you currently only have a brick and mortar shop.
- Branding: You could create a new brand for products aiming to reach a target market or a specific customer segment.
- Promotion: You could consider tailoring promotional messages to entice customers with offers, vouchers, loyalty schemes, etc.
- Sales: You could target a different demographic segment or type of customer to create new leads and opportunities.
- Product development: You can alter an existing product or develop a new one for the untapped market
Diversification
Finally, with diversification, you are aiming to sell completely different goods or services to completely different customers. This is typically the riskiest of options; it requires both product and market development.
Conclusion
Starting and growing a business requires a significant amount of time, effort and planning. Quick decisions and big investments may be appealing, but unless they translate into functional and sustainable business models, the temporary excitement can lead to very public disappointment.
Before you take steps to grow your business, you need to document your growth strategy. The research and documentation will take time, but the upfront investment will pay off in the end. Keep in mind that to succeed, your growth strategy has to be deliberate. Success will require a great deal of research and thorough planning for business growth.