Managing business growth is a careful balancing act.
Grow too fast and you risk things falling apart, potentially sabotaging your success. Grow too slow and you risk getting left behind, as your competitors take over.
This has been an ongoing challenge for many industries since the start of the pandemic. While some industries have struggled, others like healthcare, eCommerce and technology have boomed. Sudden increases in supply and demand have accelerated growth and created new challenges for management.
The key to successfully managing growth is to find the right business growth strategy to match the challenges your business is experiencing. With the right strategy, you can expand at an appropriate pace, and build sustainable growth to meet increasing demand.
The five stages of business growth
The first step to managing growth is to identify what growth stage your business is currently in. While every business follows a different trajectory, the same stages of growth can be generally identified across all industries. Each stage comes with a unique set of challenges that can drive your strategy.
Here are five widely recognised stages of business growth:
Every business starts with bringing a product or service to life. There’s a lot to consider, including how to fund your business, reach your customers and build brand awareness.
Main challenge: securing initial funding and delivering your product or service to target customers.
After surviving the launch stage, the business has shown potential. Now, the focus is to make the business sustainable and viable. Organising resources and refining your pricing model are also important.
Main challenge: managing cash flow and generating profit.
This is where a business thrives and profits grow. Business owners can either maintain a healthy business and stabilise, or push for growth.
Main challenge: deciding how to capitalise on success by either stabilising the business or preparing for growth, which may involve seeking additional sources of working capital.
At this stage, the business experiences rapid growth, with a focus on scaling. As the business becomes more complex, it is increasingly important to effectively delegate, refine processes, add product or service lines and restructure finances.
Main challenge: how to grow rapidly, often across numerous channels, and how to effectively finance that growth.
By now, the business is well-established in the marketplace, and growth has stabilised. The focus is to consolidate the gains produced by rapid growth, while balancing scale with innovations.
Main challenge: control and consolidate financial gains brought about by rapid growth.
Four business growth strategies
After identifying what stage your business is in, and what key challenges it faces, it’s time to develop a detailed growth strategy to expand your business. This might include:
1. Market penetration
This focuses on increasing your market share for an existing product or service. An example of this strategy may be a new fitness watch brand needing to take market share away from incumbent brands such as Fitbit and Apple Watch.
To do this they can:
- implement new advertising campaigns to effectively introduce their brand to the market and differentiate their product
- offer product bundles to encourage new customer purchases and increase existing customer loyalty
- run promotional offers to drive new sales.
2. Market development
Market development involves taking an existing product or service and offering it to a new segment of the market. This strategy can work well for service-based businesses who have a high-tier offering, but want to broaden their reach. In this instance, these businesses can create a ‘lite’ version of their offering at a reduced cost. This then opens them up to a whole new segment. Some other examples of this strategy in play include:
- targeting a new geographical market with an existing product or service
- cross-selling in collaboration with another brand
- expanding into new sales channels, often using technology to your advantage.
3. Product development
Expanding product lines within existing markets is one of the best ways to grow your business. It also opens the potential for cross-selling and increased revenue. A classic example of this would be the Apple suite of products. They began selling computers and then went on to develop new and innovative products as the market and technology evolved. Product development might also include:
- providing complementary add-on features or services to existing products
- tweaking existing offerings to provide more features or value
- using customer feedback to guide the direction of which new products you invest in.
Diversification is where you create new products for new markets. It can introduce additional revenue streams and spread risk across your business. While this is the highest risk of all these strategies, it can also deliver the potential for the highest returns. You can diversify:
- vertically into your supply chain – either upstream, such as a mining company expanding into processing and developing their own raw materials; or downstream, such as an online streaming service moving into developing its own content.
- horizontally to offer complementary products to customers – such as a hamper gift eCommerce retailer expanding into offering corporate gifts or catering.
You can also use existing expertise to break into new markets that have synergies with your existing business.
Three necessities for growth
Whatever growth stage your business faces, there are a few things you’ll always need:
Even when business is going well, growth activities often require additional finance. Having access to flexible finance options can fund strategy and fuel growth.
Technology will inevitably play an important role in growth. It can streamline processes, improve customer experience and manage increased demand as you grow.
Consider the skills your business needs for success. Recruiting subject matter experts in areas such as marketing, product development and business improvement can help you quickly set up and get on the right track.
Are you ready to grow? It’s time to get planning.
Disclaimer: The following comments are only our views and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as at the date of publication and are subject to change without notice.