If you want to grow your business, you’ll need to use key business expansion strategies, preferably one that involves the least amount of risk and effort.
Depending on the demand for your products and services, your competition, the size of your market and market conditions, you could use one of the following growth strategies to expand your existing business:
- Increase your market penetration by selling more of your products or services to your existing customers.
- Expand your market by moving into new areas, territories or countries.
- Increase the range of products or services you offer to new and existing customers.
- Diversify your existing products or services to attract different customers.
- Use new channels to sell your products or services such as through an online shop, direct mail catalogues, joint venture partners or affiliate partners.
- Acquire or merge with another company (to increase market penetration, market expansion, product diversification, and market share). You could buy or merge with a competitor, a supplier or a distributor to achieve your growth objectives.
Most of these can be achieved through organic business growth. The exception is the acquisition of or merger with another company. Merging or acquiring other companies can be riskier than relying on organic growth but if successful can help your company to achieve rapid growth.
Obstacles to growth
Sadly, only a third of small businesses survive more than 10 years, according to the US Small Business Administration (SBA). They fail for a number of reasons, including:
A lack of planning
Too many small business owners create a business plan to get start-up funding then never refer to it again. By comparison, the owners of growing, thriving companies develop strategies to achieve the objectives they’ve detailed in their business plan, according to Paul Vennard, Regional Director of the CFO Centre.
They then use their business plan as a benchmark by which they can measure progress towards their goals on a monthly, weekly and even, a day to day basis.
For instance, they can see how close they are to achieve a percentage increase in profit margins.
They can also use the business plan to develop systems and processes that will help make the company more efficient and more likely to survive and achieve its long term objectives.
Lack of skilled people
To expand your business you need people with the right skills and knowledge to deliver your products and services, says Vennard.
But a 2018 global talent shortage survey by the Manpower Group showed that 45% of companies struggle to find people with the right skills to fill open positions. Those unfulfilled roles pose a threat to a company’s productivity, efficiency, and future growth.
Lack of expert advice
Businesses can fail to achieve their growth projections simply because their owners and management team didn’t have access to people with expertise. Quite often, business owners are not even aware they can get help from people who have experience in growing companies. For instance, the CFO Centre offers part-time Chief Financial Officers who have all had big business experience. They can guide SME owners and help them overcome obstacles to growth.
Inadequate risk management
Poor risk management, that is a failure to identify, assess and control the internal and external threats to the company’s capital and earnings, can result in workplace accidents, failed projects, computer security breaches, loss of contracts, higher costs, legal action and, in the very worst cases, closure.
Poor financial management
Quite often the CEOs of small companies lack sophisticated financial knowledge. Poor financial management can lead to inadequate controls, high overheads, and overly optimistic financial forecasts. Some business owners can be unaware of the impact that rapid growth can have on cash flow and come unstuck.
Little market research and poor marketing efforts
Inadequate market research can have disastrous consequences for any company. Your company could expend time and energy trying to sell to an audience that is not interested or can’t afford to buy your products or services, for instance.
Similarly, your company could miss opportunities such as joint ventures or expansion possibilities. It could also overlook threats such as new market entrants or changing consumer tastes.
You need to have realistic expectations of your marketing’s reach and likely sales conversion ratio.
Even when your market research is adequate, your company still needs strong marketing to ensure your target audience is aware of your products and services. You need to have the capacity to send the right message to the right people at the right time.
Lack of funding
Your company’s growth might plateau due to a lack of growth funding. This is particularly the case if your company is past the start-up phase, and if you don’t have further assets to borrow against.