To push your business forward and make it bigger you need a clearly defined growth strategy. This means something more than increasing sales targets or revenue projections. Instead, it means understanding the main growth strategies that are available to your business, selecting which is most appropriate and then adapting it to your objectives.
There are five main growth strategies you can use to expand your business:
- Market penetration
- Market development
- Product/service expansion
Let’s look at each in more detail.
Market penetration involves selling more of your existing products or services in your existing market. In other words, it is about increasing your market share.
In most situations, this is the growth strategy that is the least risky. This is because you already know your market, you have established products, and you already have customers who buy from you.
The key to success with this growth strategy is to differentiate your offering from the competition so you can attract new clients, increase revenues from your existing clients, or both.
The market development growth strategy involves selling your existing products or services to new markets. One of the most common ways to achieve this is geographically, i.e. extending your reach to geographical areas you don’t currently target.
This growth strategy carries a bit more risk than the market penetration growth strategy as the additional markets you target will be new to your business. That said, this strategy involves going into those markets with products/service that already have a track record of success.
The product/service expansion strategy involves creating and selling a new product/service to existing customers. Often, the new product or service is closely related to the products or services you currently offer.
This growth strategy is another slight ratcheting up of the risk level as you are introducing a new product/service. You will, however, know the market.
One important thing to remember is you must do thorough market research with both the above strategies – market development and product/service expansion.
The diversification business growth strategy involves developing a completely new product or service and selling it to a new market. As both the product/service and the market are new, this is the riskiest of the five growth strategies on this list.
In the right circumstances, however, it is also the strategy with the highest potential for growth. For example, there might be limited growth available in your existing market making the market penetration strategy limited in its effectiveness. The product/service expansion strategy is another example as the new product/service might sell, but those sales might be at the expense of your existing products/services.
If you get a diversification growth strategy right, however, problems like this don’t occur, i.e. your current market, market share, and products/services remain unaffected. As a result, selling the new products/services into new markets is additional revenue, i.e. growth.
The final growth strategy you can explore is acquisition. It is not a standalone strategy as purchasing another company in almost all cases helps you achieve one of the above growth strategies:
- You can purchase a competitor in your existing market to increase your market share – market penetration
- You can purchase a competitor in a new market – market development
- The company you purchase can offer different products/services to those you currently sell – product/service expansion
- The company you purchase can have different products/services to those you currently sell, and it could sell them in a different market – diversification
While the acquisition strategy does carry risks (big enough risks that you should always seek professional advice before embarking on this strategy), you can achieve more rapid business growth than is possible with some of the other strategies.
If you would like professional help growing your business – or with anything else in relation to your business or accounting needs – please contact a member of the Gilroy Gannon team today.