Review these small business growth strategies that can help you expand, reach long term goals, and increase revenue.
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 way 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."
Steps to create a growth strategy
1. 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 in 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.
2. 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.
3. 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.
4. 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.
5. 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?
6. 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.
7. 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.