Business growth is probably one of the most written about subjects on the web and in the media. Whether its about the economy and productivity or individual businesses investing in new technology, people or equipment. Never mind the number of finance providers, coaches, consultants or agencies encouraging all of us business owners to focus on growth! Growth Potential is a key Value Driver. But what’s the best way for you to grow your business? In this article I will talk about growing it organically and next week I will share my thoughts on acquisition.
Organic Business Growth
As the owner of a small to medium-sized business you are probably thinking about how you can grow the business to get more profit. More profit means more choice to invest for the future, expand the business and of course take a bigger reward for yourself (that could be a mix of more money and time).
Or perhaps you are thinking of selling the business to an external buyer, your management team or onto the next generation. In those cases, the value you get for the business will depend on what the buyers think is the growth potential of the business.
Whether its growth for you in the next few years or for a buyer, it is really important to have a clear view of the growth potential of the business. When I take my customers through the Value Builder System, we spend a fair amount of time on thinking and acting on growth potential. But, let’s not get stuck in complex business strategy. Let’s keep it simple.
Most owners of an SME will focus on organic growth, funded through cashflow or with external funding. A minority of owners will also look at acquisition which i will talk about in my next blog.
When I help my customers to think about organic growth, I love using the Ansoff Matrix.
Where should you look for growth?
I’ve outlined below what each of the 4 areas mean in real business terms:
Doing more of the same – market penetration
Sticking to the knitting – same product or service range pitched to the same market. More marketing and sales activity or trying something different. If you’re a small player in a big market, especially if it is growing, then this strategy probably has more mileage. Of course, you need to be good at what you do, offer real value to customers and stand out from your competitors. This can be a low-risk approach to growth and it can be easier to focus on what you know well. But, you need to consider if you’re going to get the rate of growth you want.
Same products to a new market – market development
Partly sticking to the knitting, in that you focus on doing what you should be good at. Like 3 customers that I’m currently working with, the new market could be:
- Geographic – expanding from Wakefield into Huddersfield;
- New sector – adding the home products market to Kitchen, Bedroom, Bathroom market;
- Different size of customer – using experience working with primary schools to secondary schools.
The attraction of this approach is that you know how to sell and deliver your product, although there will new operational things to work on. For example, fixing computers in Wakefield isn’t that different from fixing them in Huddersfield, but there could be logistical differences if you are based in Wakefield. Or maybe secondary schools have different buying rules from primary schools – same computers but a different way to win the work.
New products to your existing markets – product development
The other side to partly sticking to the knitting. You know the market and think you can sell new things beside what you have always sold. For example, adding permanent recruitment to an existing temporary recruitment business.
The attraction is that you should understand the market. Some of your existing customers will buy the new product. You have many open doors to test your new offering. Bear in mind though you need to be able to do a proper job with the new product. You can’t let your reputation suffer by doing a poor job. Equally, you need to think are your new products complimentary to your existing products or are you confusing people?
Bear in mind, many successful businesses focus on what they are really good at and sell to as many customers as possible. Never being overly reliant on a small group of customers.
New products to new markets – diversification
This approach feels like the highest risk: new products, new markets. You would need to do a fair amount of planning to make this work and probably start with one of the previous two approaches first. I haven’t come across too many examples of this approach. The one that comes to mind is a distribution business that thought it could set up an on-line business to sell the type of consumables it used to protect products it distributed. It didn’t work out well.
So, if you’re looking to grow your business organically, I’ve summarised below points that will help you to do just that:
- Keep it simple – the Ansoff Matrix has helped many large businesses so it can help small businesses as well;
- Share your thinking with fellow directors, management team or trusted outsider. It can be too easy to convince yourself that your idea is the best idea;
- Once you have decided where to focus then get a plan together with tasks, activities and times – share the load;
- Be prepared to set yourself some numeric targets;
- Learn from your mistakes and adapt your approach;
- Finally, if in doubt, focus on one thing. Resist distraction with all your might!
If you would like a chat about growing your business, book a free 30 minute telephone call here