The three strategies for business growth include:
- Organic Growth
- Expansion, and
Organic growth utilizes existing resources to increase revenue and net profit. It’s about increasing the volume of business and the returns generated through existing operations. These increases allow the company to reinvest profits into greater and greater growth strategies.
The Expansion Strategy occurs in addition to current organic products/services and markets by increasing the landscape served (geographic or digital), markets served, or products/services offered. This may require the company to add skill sets, tools, or resources to successfully deploy the strategy.
The third growth strategy is Acquisition. Acquisition can potentially provide for growth in the some or all of the Organic and Expansion Strategies. Because of the benefits associated with the Acquisition Strategy it can also be the most difficult and expensive of the three strategies to implement.
Let’s start with the Organic Strategy. There are three approaches to consider when implementing organic growth. The most common approach is to optimize the way products/services are sold. Companies must take a hard look at pricing, marketing efforts, and sales to maximize their effectiveness. The objective is to grow through increased sales in a more effective and efficient manner. From a pure sales perspective work on increasing the number of leads you have to work with. Then find ways to improve your close rate. By doing these you will increase your number of new customers. Next, look for ways to increase your average size sale and the average number of sales to a customer per year. A small increase in these four areas will have significant impact on company growth.
Additionally, consider the reallocation of resources to the promotion and sale of higher margin products. If your sales increase comes from these your profit will grow at an even faster rate. Finally, consider new methods of operation. Think about how businesses changed operating processes to address issues arising from the COVID pandemic. These options were available to these businesses prior to the pandemic but may not have been implemented. Had they been implemented without the pandemic they may not have enjoyed the same level of success, but they may have delivered positive results all the same.
When considering the Expansion Strategy, you should recognize that while it may give you significant advantages it can be extremely difficult to implement. Whether you are looking to expand your landscape, markets, or products/services, focus on these four key areas.
- The proposed customer group, or Target Market.
- Your Ideal Client Profile or Avatar.
- The Demographics of the intended market.
- In-Depth Market Data and Analysis.
By focusing on these you will position the company for greater success in selecting and implementing your expansion strategy.
The Acquisition Strategy requires the most forethought and planning. You should never just go out and acquire a company because it’s available. If you’re going to use this strategy you need to identify your objective. Why are you embarking on this strategy? What do you hope to accomplish? What will a successful implementation of the strategy look like? What level of Return on Investment (ROI) is preferred? These are they type of questions you need to answer before you even get started planning.
Once you’re comfortable that the objective is clear begin identifying target companies. Your target companies should specifically align with your objectives. In addition, make sure that they align with, or complement your core competencies and products/services. Ideally, they will add something new by way of markets or products and services. Lastly, look for them to enhance operations through additional skills, tools, technology, or resources. They should be able to provide improved efficiencies within the company.
As targets are identified measure their contribution value. While there are numerous considerations in assessing a potential acquisition target, be sure to consider:
- Company Culture
- Markets Served
- Strategies Utilized
- Products & Services Delivered
- Processes and Systems
Whatever growth strategy(s) you choose make sure that you do it intentionally and with a strong focus on achieving your objective. Stay true to that and you’ll likely enjoy the fruits of success.
Contact me at Richard@StrategicOrientation.com for an in-depth analysis of your growth strategies and the development of a detailed plan for success.