7/2/2019 5 Business Growth Strategies for your company to increase profit

5 Business Growth Strategies for your

company to increase profit
Home  Strategy  5 Business Growth Strategies for your company to increase pro t

Most of the big companies started out small in the past but the reality is that only a handful of
small businesses will eventually grow to become big brands. According to statistics,

Only 50% of startups survive more than 5 years

9 out of 10 startups fail  
Only 0.1% of businesses ever reach 250 million in annual revenue.

Growing a successful business is easier said than done and companies of all sizes face a lot
of challenges. Wondering how you can ensure that your business is sustainable? You need to
develop a growth strategy for your company. If you don’t have a solid plan for growth, you are
actually increasing the chance of losing your business to your competitors.

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If you want to grow your company, you need determination, good business practices, and
application of good business growth strategies. Keep in mind that an effective growth strategy
is more than simply envisioning long-term success. You should gure out measurable steps in
your growth and follow them.

Of course, small and medium-sized businesses vary greatly in their size and capacity for
growth. They have different organizational structures and management styles but it is apparent
that SMBs experience common business growing pains and problems at similar stages in their
development.

In this article, we are going to discuss the stages of business growth and types of business
growth strategies that can be used by any business to achieve long-term success.

Rewards and Risks of Business Growth

Let’s start with business growth de nition. A lot of dictionaries de ne growth as “an increase,
expansion or development”. Business growth is a stage when the business reaches the point
for its expansion and searches for additional opportunities to generate more pro t. Keep in
mind that business growth can come in many forms and you shouldn’t focus only on revenue
or asset growth because, in this case, you risk missing out making efforts that can result in
incredible returns. In fact, business growth means a lot of things that include increase in sales,
market expansion, and growth of business value.

Growth is the goal of any business and there are 2 types of business growth:

Organic business growth is slow and tends to be safer because you are growing
naturally just by doing more of what your business is good at. Besides, you have more
time for building the necessary capabilities to support your expansion and manage it.
Rapid business growth is possible because of implementing a successful business
strategy. It can be very pro table but, at the same time, it involves certain risks and
challenges.

There are plenty of reasons to pursue business growth such as increased revenue, increased
importance in the industry, and wider brand recognition. Well-known brands typically spend
less time and money on marketing to reach new customers and keep them. Instead, they can
use their funds on service expansion and product innovation. Besides, they can easier attract
big-name clients, top talent, and investors which are necessary for a company’s growth.

But there are certain risks. Business growth may lead to revenue loss if your decisions are not
based on a signi cant amount of market research. According to surveys, about 42% of failed
startup companies reported lack of market need as the key reason for their failure. Other
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leading failure reasons are failed pivots in products and services, hiring wrong team members,
and legal challenges. The good news is that most of these growth issues are avoidable.

What should you do to avoid pitfalls or at least minimize the risks of business growth? That’s
clear. Your decisions should be informed and based on long-term goals rather than on day-to-
day needs. So before making an attempt to expand your business, you should take time to
document your expansion strategy and ensure that your decisions are based not on
assumptions but on reliable business data.

 If you think that this is too complicated for you, you can always rely on professional help of
Extrabrains’ business experts. We can help you develop a business growth strategy that details
your speci c business goals and de nes steps you need to take for meeting those goals. This
document can serve you as a road map for decision making and it will help you avoid risks.

5 Stages of Business Growth

During the growth, all small businesses go through certain stages of the business life cycle and
encounter speci c 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 pro tability 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 nd 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 nd money for that growth.

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5. Maturity stage is nal 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 de ned
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 pro t, you can employ the following strategies:

Expanding into existing markets

Penetrating into new markets
Expanding product selection
Diversi cation
Expanding through acquisitions

Market Penetration

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 speci c underserved
niche.
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Market Development

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.

Product Expansion

 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.

Diversi cation

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.

Diversi cation 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.

Acquisitions

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

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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 speci c needs to add value. Besides, the company you
buy may be pro table from the rst day. It’s a good strategy if you want to expand your
business into a new geographic location.

Need Help in Developing a Strategy to Grow Your

Business?

Everybody knows that starting a business and growing it requires a lot of time, effort, and
precise planning. It may be appealing to make quick decisions and big investments but if they
don’t translate in fully sustainable and functional business models, they won’t bring results you
expect and can lead to disappointment. Documenting business growth strategies is a must for
all companies before they take steps to grow their businesses. Of course, you’ll need to
research your market and the documentation will take some time but the upfront investment
will pay off in the long run.

Developing a good growth strategy is not a one-size- ts-all process. It would be foolish to
make strategic decisions based on successes of other companies. Of course, you can learn
from another company but you have to develop a unique plan based on your company’s data.
You should tailor your strategy to your speci c business and your customers. If you don’t know
where to start and need advice, Extrabrains can help you in the development of a successful

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growth strategy for your business. Our experts have an extensive experience in creating
successful growth strategies for small and medium-sized businesses that really work and
bring results. Contact us and schedule a free consultation to learn how we can help you
develop strategic decisions that will naturally lead to successful growth.

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