Business Growth Strategies to increase profit
During the growth, all small businesses go through certain stages of the business life cycle and encounter specific problems that may require different approaches to their solutions. Understanding which stage you are in can make a great difference in the strategic planning and operations of your business. You enter a business life cycle at the moment you decide to set up a business and the beginning stages are almost always full of challenges and business growing pains.
1. Development stage is just the beginning. You have a brilliant idea of starting a new business and you are ready to take the plunge. You need to test your business idea – perform a market research, gather feedback from your friends and the industry specialists to understand whether your idea is worth pursuing.
2. Startup stage. Your business is legal now. You have developed products or services that your company has to offer and start marketing and selling them. At this stage, the major problems are obtaining customers and delivering the products or services. The business strategy is simply to remain alive and became viable.
3. Survival stage. Now the business has enough customers and adds new ones. The business is generating revenue that helps pay for operational expenses. The company may grow in size and profitability and you may need to make changes in your business model before expanding your business to the mass market.
4. Expansion stage. The business is thriving. It’s time to expand and find new markets and distribution channels. You may add new products and services and have a rapid revenue growth. The key problems are how to grow rapidly and where to find money for that growth.
5. Maturity stage is final in the business life cycle. The business dominates in its market. The company has enough resources for detailed and strategic planning. If the company preserves entrepreneurial spirit, it can be a powerful player on the market. At this stage, entrepreneurs have 2 choices: expand further or exit the business.
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Types of Business Growth Strategies
There are different types of business growth models. In the early stages, your goals are defined by the founder’s philosophy and are clear. The model for your company’s growth is simple business activities that can improve your margins. But when your business evolves to a more mature phase in its lifecycle, you will need to build a strategic growth map which will complement your business model.
Business is a living thing and it has to grow if it’s going to survive. There are several common business growth strategies and some of them may present more risk than others. You can also use a combination of some of them or their variations, taking into consideration your company’s size and capabilities. You can experiment and try 2 or more strategies to understand what combination works best.
To increase profit, you can employ the following strategies:
- Expanding into existing markets
- Penetrating into new markets
- Expanding product selection
- Expanding through acquisitions
It’s one of the best-known and least expensive types of business growth strategies. The main goal of this strategy is to capture the bigger share of the company’s current market with existing products. To gain share in a market with established competition, you need to differentiate your business from your competitors. You can do it by offering unique value to your potential customers and attracting customers away from your competitors. This can be accomplished by lowering prices or increasing promotion and distribution support. You can also perform the market segmentation and focus on expanding into a specific underserved niche.
This strategy involves increasing sales of existing products on new markets. Market growth can take a lot of forms. You can expand sales to a new geographical area – a new city or a foreign country. This can be done via a partnership with distributors with established networks. If you plan to enter a new market in a different country, it’s important to consider differences in local regulations and culture. Well-known brands can do market expansion by offering franchise options to local entrepreneurs. In this way, they can enter new markets with lower risks. You can start selling products online through your own website or Amazon and eBay and reach national and international customers.
This strategy is also known as product development and involves launching new services or products on the existing markets. SMB typically use this strategy by offering different variations of their main product lines to reach large audience. For example, you can develop a premium version of your product for the luxury market segment. This method is a useful addition to any business growth model because it is based on the existing infrastructure. New products can be added by investing in research and development of additional products or purchasing rights to produce a product of another company.
This risky method is known as launching new products on new markets. It can be used as a valuable addition to the existing model. Before you start doing it, you should perform a good market research and be ready to invest a lot of money to establish your presence. You will also need to hire a lot of people and build new infrastructures. This method is good for more mature companies with a strong position in their target market. It can be done through mergers and partnerships.
Diversification can be
- Horizontal –developing new products and selling them to the existing customer group
- Vertical – when the business enters the sector of its customers or suppliers
- Concentric – developing a new line of products that are similar to the existing products
- Conglomerate – developing absolutely new products that appeal to a new group of customers.
This method is good for mature companies. To expand operations, businesses often purchase strong companies that are already operating in the target markets. The downside of this effective method is steep upfront costs but in the long run, it’s a cost-effective way to capture a new market or to increase market share. You can get an established customer base and operation which can be adjusted to your specific needs to add value. Besides, the company you buy may be profitable from the first day. It’s a good strategy if you want to expand your business into a new geographic location.