To fulfil your business expansion ambitions, you’ll need to adopt the right growth strategy. As an entrepreneur, you’ll be looking to find a strategy that involves the least amount of risk and effort. This is a huge responsibility and you might feel rather daunted as you weigh up the options. At times like this, you might be thinking that you could really do with a professional sounding board. Someone who “gets” your vision, who has your back and shares your focus on translating vision and strategy into deliverables in your business. Our clients tell us their CFO gives them this support but you might also talk to a business mentor or coach or even a friend whose judgement you trust.
As you begin to weigh up your options for business expansion, you need to consider which opportunities are the best match for your company. To do this, you’ll need to appraise the demand for your products and services, your competition, the size of your market and market conditions. Once you have this information to hand, you can select the growth strategy that matches your situation.
The 6 common business expansion strategies that most entrepreneurs favour are:
- 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 setting up an online shop on your website, selling through social media channels, 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.
As you can see, most of these expansion strategies will lead to organic business growth. Although this typically takes longer, it often feels safer and you can put systems in place gradually to match the increases in customers and jobs. You can tap into specialist expertise at the right time and de-risk each decision as it arises.
The exception in this list is option number 6, the acquisition of or merger with another company. There are advantages and disadvantages to merging or acquiring other companies. This strategy can be riskier than relying on organic growth because you’re bringing together two different operations and integrating the cultures and teams. On the other hand, when an acquisition or merger is successful, it can accelerate your company to achieve rapid growth.
If you are an entrepreneur facing the challenge of balancing out these risks or opportunities on your own, you might feel overwhelmed. It can be tough to keep a clear focus on all the factors in the decision. We completely understand how this feels. Our CFOs work one-to-one with clients, or as an expert team where a company needs specialist advice, to help them build winning growth strategies. Read on for insights into their approach to the challenges.
Overcoming obstacles to growth
According to the US Small Business Administration (SBA) only a third of small businesses survive more than 10 years, which is a great shame. Looking at the main reasons that they fail, we see some key themes. These include:
1. A lack of planning
Too many small business owners create a business plan to get start-up funding then never refer to it again. If this sounds familiar, it’s worth taking a moment to reflect on the value locked up in that plan. You have already invested time (and maybe money) in setting out how you plan to expand your company, so let’s dust it off and start putting your efforts to work in your business. If you need a little inspiration, our CFOs confirm that the owners of growing, thriving companies develop and implement their strategies. This is the key to achieving the objectives they’ve detailed in their business plan.
These entrepreneurs then use their business plan as a benchmark. This allows them to measure progress towards their goals on a monthly, weekly and even, a day to day basis. Even if your numbers have to change, you still have some guiding principles so you can keep a focus on where you’re heading.
For instance, you can see how close you are to achieving a percentage increase in profit margins. You can also use the business plan to develop systems and processes that will help make the company more efficient. This puts you in a position where your business is more likely to survive and achieve its long term objectives.
2. Lack of skilled people
To expand your business you need people with the right skills and knowledge to deliver your products and services, says Paul Vennard, an experienced CFO in the CFO Centre’s UK team.
Unfortunately, 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. Recent surveys show that this problem is persisting into the 2020s and these unfulfilled roles pose a threat to a company’s productivity, efficiency, and future growth.
3. 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 the right expertise. Quite often, business owners are not even aware of how easy it is to get help from people with experience of growing companies. Whether you choose a part-time CFO (backed by a global team) or another trusted advisor who is on your side and shares your passion, you need to work with people with vision, ambition (for your business) and experience of business expansion. You need someone you can rely on to guide you and help you overcome obstacles to growth.
4. Inadequate risk management
When the managers in a company have poor risk management skills, we see an inconsistent approach to this key aspect of leadership. It is critical for your team to identify, assess and control the internal and external threats to the company’s capital and earnings. Without this, you could be exposed to excess workplace accidents, failed projects, computer security breaches, loss of contracts, higher costs, legal action and, in the very worst cases, closure.
5. Poor financial management
Quite often we find that CEOs of small companies lack sophisticated financial knowledge. They have many other admirable attributes but this is an area where many people struggle. If this sounds familiar, you should seek support from a CFO who has seen it all before and won’t judge you or the skeletons in your cupboards. Bringing the issues into the open, with someone who is firmly on your side, will help you address the barriers that could hamper your business expansion plans.
If you don’t tackle the status quo, poor financial management can lead to inadequate controls, high overheads, and overly optimistic financial forecasts. Unfortunately, business owners don’t always realise that rapid growth can have a huge impact on cash flow and they come unstuck as a result.
6. Too little market research and poor marketing efforts
Inadequate market research can have disastrous consequences for any company. The last thing anyone wants for your business is that you expend time and energy trying to sell to an audience that is not interested or can’t afford to buy your products or services.
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. This sounds easy but we find that it’s actually very hard to keep a fair perspective when you’re so close to your own products and services.
Assuming 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. You also need to have the right ethos and skills in the business to make sure you can deliver on the promises that marketing is making to your prospects and customers.
Lack of funding
Your company’s growth might plateau due to a lack of growth funding. This is a particular risk if your company is past the start-up phase, and if you don’t have further assets to borrow against. It can be very frustrating but it is a common challenge that our CFOs help clients to overcome. Through our team approach and our exceptional network of contacts, we help clients access the funding they need to fulfil their ambitions for growth.
Are you wondering how a superstar CFO with a track record in business expansion can help you?
Would you like a chance to talk to someone who understands exactly what’s involved in business expansion? We’re pretty sure the answer is “yes” so why not book a no-obligation, 60 minute discovery call with one of our superstar CFOs?
Simply give us a call on 0800 169 1499 and let our in-house team know that you’re looking to expand your business. They’ll book in your call and help you get your journey to success underway.
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