How do you know when your business is ready to turn its next growth curve?
Here are five tips plus one to get you started.
In today’s world, businesses need to consistently adapt, evolve and innovate to stay relevant and competitive in a constantly evolving local and global business landscape.
Much as it is desirable, almost tempting to make growth decisions or implement expansion strategies within a business, the precision of timing and process is critical to its overall outcome.
- “Nothing kills a business faster than the weight of a wrongly timed or badly executed growth strategy”.
Businesses make expansion/growth decisions based on their projected growth map or timeline without necessarily assessing correctly if the business is truly ready for this journey, a daunting process for all stakeholders.
Are there indicative identifiers that can help you know when your business is ready for its next phase of growth? Yes.
The link between a business’s growth preparedness and market readiness is crucial.
Should your expansion plan reflect social and economic factors in your market or solely your business’s state?
Consider a scenario: Is your business poised for growth while operating in a sluggish market?
Spotting a pivotal growth phase for your business is paramount.
Such a phase is characterized by evident signals of expansion readiness, gauged through robust growth factors and data-driven analysis. Discernible markers encompass:
- Consistent Revenue Growth:
Consistently meeting or exceeding revenue projections over three years may signal your business’s readiness for the next growth phase. Revenue growth doesn’t always equate to profitability, yet it showcases demand and cash flow stability. Still, relying solely on this metric for expansion isn’t comprehensive enough. - Under capacity to meet growing Demand
Regardless of your business domain, a surge in demand often signifies readiness for expansion. Yet, investigating the underlying reasons for demand outstripping supply is crucial. Ensure it’s not due to system inefficiencies, operational wastage, or artificial demand spikes. Optimal utilization of production factors (Land, Labour, Capital, and Entrepreneurship) must be exhausted, yet the business struggles to meet the scale of demand. - Firmly established Systems, Processes and Structures
“Culture” encapsulates these tenets effectively. It’s a cornerstone for growth, supporting systems, processes, and structures. These foundations facilitate efficient management of resources, crucial for profitable operations within your expansion strategy. - Team Readiness
A vital gauge of growth readiness is the team’s preparedness. Do they possess the expertise and aptitude to excel in the forthcoming stage of expansion? Can they handle the rigour? Is the team structure optimal, leadership fitting, skills aligned for your growth plan? If not, resources must be allocated to recruit, compensate, and retain the required talent while fostering the right culture for attraction and retention. - Availability of Expansion Capital
A significant sign of growth readiness is having a cash reserve for fueling planned expansion. Scaling up requires substantial investment, covering machinery, larger facilities, team growth, and marketing. A ready cash stash within the business aids in financing the expansion’s cost, without hindering current operations. It’s vital to estimate capital expenses accurately. Financing could come from shareholder contributions, new investments, or debts. Crucially, the business’s existing operations shouldn’t be compromised by utilizing expansion capital, ensuring a strategic balance between growth and sustainability. - Technology and Innovation Readiness
Businesses often overlook the intricate technology and infrastructure changes necessary for a successful expansion strategy, a factor greatly influenced by diverse markets. Pricing, customer support, accounting, and reporting models, as well as innovative products and targeted data utilization, are pivotal. Adapting to new markets or maximizing existing ones requires meticulous planning.
Looking beyond internal benchmarks, a thorough analysis of external market factors becomes imperative. Even amid positive internal signals, the timing, trajectory, and extent of expansion hinge upon prevailing market conditions. Defining the “market” involves mapping where your product resonates with informed, reachable, and paying consumers.
Expanding a business involves financial risks; hence, prudent expansion decisions must factor in market catalysts such as demand, volatility, entry expenses, macroeconomics, consumer conduct, and logistical intricacies.
Consider Igor Ansoff’s business-market matrix, encompassing Market Penetration, Development, Product Innovation, and Diversification.
Navigating these quadrants entails diminishing familiarity and heightening risk.
A robust growth strategy augments value, ensuring lasting gains for stakeholders and enterprise prosperity.
Typically, one quadrant flank leverages existing markets and products, while the other explores novel frontiers. Recognizing growth opportunities is pivotal, but aligning growth strategy with business and market dynamics is paramount.
Introducing fresh product lines necessitates research and development investments to align with consumer and market requisites, whether in established or novel markets. Irrespective of expansion direction, customize it to organizational readiness and broader objectives.
Discern value propositions, enduring revenue potential, and resource prerequisites for effective strategy execution.
A judicious expansion strategy upholds stakeholder value be it customers, proprietors, workforce, backers, suppliers, retailers, or the community across time.
Tosin Ajose’s Bio
Tosin Ajose is an award-winning commercial lawyer, she is the Founding Partner at DealHQ Partners – a leading transactional advisory firm in Nigeria.
A serial entrepreneur and astute public speaker and writer, Tosin is passionate about supporting Early-Stage Businesses and Venture Building in general.
When she is not wearing her lawyer hat Tosin will likely be found in the classroom. She is an Adjunct Lecturer with the Centre for Housing and Sustainable Development, Nigeria and a Resident Faculty with LearnHub Executive Education.
