Are you considering growing your business and expanding into new markets? Have you thought about the effect growth may have on your business? That growth doesn’t necessarily translate into more profit.
In fact, growth can be a double edged sword; if managed properly, it can lead to a larger, more profitable business; if managed badly, it can lead to disaster. Regardless, growing a business will put strain on you and your management team, it will require additional time and resources, and it will bring risk – so best be prepared.
One of the first things you should do is consider your motivation for this growth.There are many small businesses that choose to stay small, yet are successful and highly profitable. So, let’s deal with motivation first.
Why do you want to grow your business?
To give context, we’re talking about an aggressive growth strategy that involves entering new markets, creating new product lines, and diversification.
There are any number of reasons for expanding your business, but, ultimately, your goal should be higher profitability. There may be pressure from customers, you may see an opportunity in a new market, your own success may be driving your expansion. Regardless of the motivation, growth is risky and should be be given due consideration.
Zingerman’s is a good example of how two successful entrepreneurs, when faced with the decision to expand or stay local, decided to stay local rather than take their Ann Arbor deli to the next level. Their reason? Ari Weinzweig puts it best: “I didn’t want to spend my time flying to Kansas City to see some mediocre Zingerman’s”.
Ari and his partner Paul stayed in Ann Arbor, Michigan. They created a vision for a family of businesses, diversifying to support the deli – bakery, creamery, coffee, candy etc – and part owned by passionate entrepreneurs from the community. As a family of businesses, they now have annual revenues in excess of $ 40 million.
The key to their success was taking time to create a vision; what would their business look like in the future, and did expansion really fit with their personal goals.
Pro-Tip: Write a vision for your business. Ask yourself: What does it look like a year from now, 5 years from now, 10 years from now? How does it align with your personal vision, and what are steps you need to take to get there?
Are You Ready for Growth?
Once you’re certain you want to grow your business, evaluate your operational readiness. Growing a business, regardless of how – franchising, diversification, market development, product development – will put strain on existing operations, your management team, your administrative processes, and your resources.
Will your business cope with the additional pressure?
One way to answer the question is to evaluate how well your processes are working currently. Are your administrative processes working efficiently? Are they easily scalable? Can you consistently forecast your sales conversion and revenue, and can it be scaled into new markets?
When you’re a small business with an enthusiastic team, it’s relatively easy to keep the focus on high-quality service. But growth will put strain on your passion and attention to detail, so make sure your operations are ready to scale.
Pro-Tip: Implement a business operating system that will ensure your business is operating efficiently before you embark on a growth phase.
4 Leading Strategies for Growth
I’m sure you’ve heard the old adage, “Don’t put all your eggs in one basket.” Diversification allows you to spread the risk by tweaking your existing product or service so that it appeals to a new group of consumers or users. For example, if you have a software product that you sell as premium, you may want to introduce a less-expensive version for the lower end of the market.
Diversification is less risky; you could diversify in a way that complements your existing business. For instance, the reason Zingerman’s created a bakery – no more early morning bread runs to Detroit, and quality bread for the community.
The next rung up the ladder is to devise a way to sell more of your current product to a new market—offering your product or service to customers in another city or state, for example. Market development is more risky: overheads associated with a new office, resources required to staff the new location, managing the new location etc. If possible, try to: keep your operations and sales central, ship your product to customers, or working with resellers.
This involves developing new products to sell to customers. Look for opportunities with customers and partners that will give you the chance to introduce a new product or service. In many instances the partner or customer may be willing to invest in product development if they have first move advantage. Or, they may be willing to let you provide a new service that you are not currently providing, based on trust and relationship. Look for opportunities to fill gaps that bring added value to your customer and allow you to develop new products and services.
Expand to the Web
The Internet has transformed the way we work; meetings no longer necessitate travel, products can be sold online, service delivered online – from any location in the world. Zingerman’s will ship you Burger Steak Bacon. Most software companies deliver cloud-based, pay-as-you-go software. The Web is a low cost, easy-to-manage way to scale your business and it is a must for any growth strategy.
Summing it up, before you adopt an aggressive growth strategy, consider your motivation and create a vision for the future. If growth is part of your vision, check your business operational readiness. If operation readiness gauges are in the green, figure out the strategy you’re going to follow and prepare for some hard work.
Image credit Michigan Municipal LeagueBusiness & Finance Articles on Business 2 Community