No business stays the same forever – it’s not like household-name companies were born dominating their markets. Once upon a time, they too were small businesses like yours, and their owners had to think and work hard to become industry leaders. If they can do it, you can too – and small business growth strategies can help you get there.
Below, review nine small business growth strategies that can help you expand, reach long term goals, and increase revenue.
What are growth strategies?
Small business growth strategies are steps you’ll create and follow in order to (hopefully!) get your company from where it is now to where you want it to be. A typical growth strategy may include efforts to introduce new products, add new locations, expand marketing efforts, or some combination thereof. Ideally, after you implement your growth strategy, you’ll find yourself regularly selling more products, occupying a larger share of the market, or reaching some other goal you’ve set.
Do growth strategies work?
Although small business failure rates in certain industries can be high, growth strategies work more often than not. That’s because growth strategies provide a blueprint to follow and help guide your actions as you scale your business. This makes it easier to visualize and plan the future of your business.
9 small business growth strategies
Among the most commonly used small business growth strategies are:
1. Market penetration
Market penetration refers to the successful selling of a product or service in a specific market. It is measured by the amount of sales volume of existing products or services compared to the total target market. There are several ways to approach market segment penetration.
- Lower prices - If you’re in a market where there is little difference between products or services, a lower price can help increase market share. For example, if you own a landscaping business, research competitor pricing. If you can undercut what they charge, you can potentially attract new customers and increase sales along with your share of the overall landscaping market in your area.
- Offer something different - One SmartBiz Loans customer is in the growing skateboard industry. The owner recognized a neglected share of the market. SkateXS was created to produce kid-sized skateboards and successfully captured the attention of parents. Go beyond traditional marketing. Use alternative channels to promote your differences and help you stand out.
- Find new customers - There are several proven strategies that can help increase your customer base. These include asking for referrals, forming strategic partnerships, networking, and offering special discounts to potential customers only.
- Pump up the personality - Establish a voice and tone for your company communication and weave it throughout all channels. Your website, social media platforms, and blog are great places to start. The Middle Finger Project Blog has examples of big companies that have established a unique personality: 7 Companies Doing Personality RIGHT.
2. Market expansion
You can expand your market by selling your current products and services in new markets. Market expansion might be a good strategy if you face stiff competition and there’s no room for growth in the current market. Done & Done Home is an organization business who worked with SmartBiz. The owners initially helped an interior designer who needed to declutter and then worked with a family friend who was a real estate broker. That’s when the business really took off. “We started talking to real estate agents. Now 40% of our jobs come through that industry,” co-owner Katherine reports.
3. Product expansion
You continue selling within your existing market when you use product expansion but you add new products. Asha Waterstreet used this product development strategy when she received a low-cost SBA loan from a SmartBiz marketplace bank. She owns Tasteful Additions, a brick and mortar retail store selling gourmet salts and vinegars. In addition to using the funds for working capital, she expanded her product line to include tableware as well as hand-crafted body care products that would appeal to current customers.
4. New products for new customers
You should have a good handle on your ideal customer. However, that customer base might not provide the financial support you need to operate or grow your business. SmartBiz customer Rescigno’s Marketing Connections handles direct mail fulfillment for large university’s fundraising efforts. The industry for direct mail has lessened considerably with the onset of technology and the business owner knew she needed to attract new customers. Looking for reinvention, she researched recession proof industries and discovered that the only ones not affected by an economic downturn are funerals and weddings. With help from her SBA loan, Rescigno’s launched a new wedding invitation division.
5. Acquisition of other companies
Another growth strategy, riskier than most, is to expand operations by purchasing another business. A small business may purchase another to expand their product line and enter new markets. A business owner must have a solid idea of what they want from an acquisition strategy because of the large investment required.
6. Integrative growth strategies
An integrative growth strategy is when a company increases sales and profits through backward, forward, or horizontal integration within its industry. These strategies are defined as:
- Horizontal integration - A business grows by acquiring a similar company in their industry at the same point of the supply chain.
- Vertical integration - A business expands by acquiring another company that operates before or after them in the supply chain
- Backward integration - A form of vertical integration. A business expands its role to fulfill tasks formerly completed by businesses up the supply chain. Companies pursue backward integration when it is expected to result in improved efficiency and cost savings.
- Forward integration - A business strategy that involves expanding a company's activities to include the direct distribution of its products. Forward integration is referred to as "cutting out the middleman."
7. Alternative channels
As marketing goes, pursuing customers through only one channel – such as social media, print ads, email marketing – unnecessarily limits your potential customer base. Using alternative channels solves this problem. For example, you may want to use pay-per-click (PPC) advertising for short-term customer acquisition and search engine optimization (SEO) for long-term acquisition.
Diversification involves buying a thriving small business in an industry outside yours. It’s a risky growth strategy, as it enters your company into a world with which it’s potentially unfamiliar. And if things do go wrong, you can’t just detach yourself from the company you’ve bought. However, if a business growth consultant tells you that your steps for adding these new products or services are reasonable or can help boost sagging sales at your company, diversification could be worth trying.
9. Market segmentation
In market segmentation, you’ll determine the subset of your current market most likely to buy your products or services. By focusing more closely on this target market, you can increase your sales and thus grow your company. For example, if you sell cast-iron pots and pans, you could market your products with an aggressive focus on steak lovers, as plant-based people have far less use for cast iron.
12 Steps to create a growth strategy
After you’ve chosen a small business growth strategy from those listed above, take the following steps to outline your plan:
1. Determine your USP
Your unique value proposition (USP) is the quality of your company that most strongly distinguishes it from its competitors. For example, if your digital marketing company is the only brand that runs local Pinterest campaigns in a region, that’s your USP. Your USP should guide all your marketing campaigns, as it’s the message and differentiating point you wish to convey to potential customers.
2. Nail down your value proposition
The value proposition for your business states the number one reason why your product or service is best for a specific customer segment. It should always be displayed prominently on your business website and other consumer touch points. Your value proposition should be intuitive so customers can understand the value without needing additional information. Review this post from the Wordstream Blog for examples: 7 of the Best Value Proposition Examples We’ve Ever Seen. From Uber to Apple, these companies have nailed it.
3. Identify target customers
Identify characteristics of the consumers or businesses who are most likely to buy your product or service. Some common characteristics used to classify customers include:
- income level
- buying habits
- occupation or industry
- marital status
- family status
- geographic location
- hobbies and interests
Use this data to create a profile of your most promising potential customers.
4. Measure key indicators
Key performance indicators (KPIs) help you focus on the most important performance measures. KPIs show how various parts of your business are performing. According to the QuickBooks blog, here are the 7 most important KPIs to track:
- Cash flow forecast
- Gross profit margin as a percentage of sales
- Funnel drop-off rate
- Revenue growth rate
- Inventory turnover
- Accounts payable turnover
- Relative market share
For more detailed information, read the full article: The 7 Most Important KPIs to Track as a Small Business.
5. Verify revenue streams
Revenue streams are the sources of revenue generally made up of either recurring revenue, transaction-based revenue, project revenue, or service revenue. Identify yours and determine if you could add any to increase profits. Be sure they are sustainable in the long run and understand that some great ideas don’t necessarily have new revenue streams attached.
6. Conduct a competitor analysis to keep an eye on the competition
You probably put together a competitor analysis for your business plan before launching. Revisit this analysis and look at the current industry landscape. Here are questions to answer that will help you determine if there are strategies you can implement to strengthen your business:
- Who sells products or services the same or similar to yours?
- Have your competitors expanded with new products or services in the last 6 months?
- What are the strengths and weaknesses of the competition?
- What marketing and sales strategies are used by each competitor to achieve their objectives?
- How does their website look and function?
- What’s the overall market outlook in your industry?
7. Invest in talent
Hiring isn’t an area where you should be thrifty. Hire the best talent and pay them fairly. Your team represents your business and should share some of your passion to succeed. If you don’t have the resources to bring on full time employees, you have options. Review this article to learn about contract employees, seasonal employees, and more: 6 Types of Employees and Quick Facts.
8. Focus on strengths
Focus on your strengths instead of trying to improve your weaknesses. Often, entrepreneurs will act as a jack-of-all-trades, handling everything from marketing research, to sales, to payroll. This keeps costs low but at a price. Recognize where your strengths lie and take things off your plate by outsourcing if you need to manage costs.
9. Choose your development tactics
How exactly will you go about your growth strategy? To answer this key question, you’ll need to choose development tactics. For an alternative channels approach, choosing development tactics could encompass deciding which channels to use. For a product expansion strategy, this step could involve figuring out what else your current customers might want and how to start offering it to them.
10. Figure out how to monitor implementation
You’ll need a plan in place to measure your KPIs and compare them to your ideal values. This plan could involve obtaining new analytics technology or holding weekly growth meetings to get all your team members on the same page. It can also involve consulting with a small business growth expert to see if you’re truly on the right track.
11. Obtain your required resources
For small companies like yours to grow, resources are key. For example, the analytics tools you’ll need to properly monitor your growth likely aren’t free – they’re probably another line item in your growth budget. Figure out which digital and physical tools you’ll need for growth, then use financial forecasting to create a growth budget, then get to work setting up your systems.
12. Define what success looks like
Although consulting small business growth experts is often part of small business growth, only you can truly decide if your growth strategies are working. Even if your consultant tells you that your business could reach a certain threshold with more effort, what if you’re already happy with how far you’ve come? You’ll know not to second-guess yourself if you set a clear definition of success from the jump.
Perhaps success means a long-term increase in your number of customers. Or maybe it means launching a new product that quickly proves popular. But in both cases, what does long-term mean? What does popular mean? That’s up to you – only you have the data to see how your current sales compare to your prior ones. If the improvement is in the range you’re aiming for, then you’re achieving success. And no one can tell you otherwise.