Most entrepreneurs are driven to start a business ultimately; they want to see it grow, yet they often reach a certain level of success and become reluctant to change anything.
This can be risky because business growth is essential for long-term survival. Without business growth, operations can become stagnant, and standards can be lowered along with staff morale.
In this article, we look at the definition of business growth and the different types of growth. We wil also advise on building a growth strategy and consider some obstacles to business growth.
What is Business Growth?
Growth is essential for the long-term health and survival of a business.
The MBA Knowledge Base defines business growth as follows:
The term ‘business growth’ can refer to several factors: increases in sales volume, production capacity, employment, and use of raw materials and power.
Simply put, business growth means an increase in the size or scale of operations of a business and is usually accompanied by an increase in its resources and output.
A healthy business that can demonstrate continuous growth will be able to acquire assets, attract the best talent and secure funding for investments.
Grow your business, and more opportunities will follow. You may wish to explore new avenues, expand your products or services, or move into different markets. You will be better placed to respond to market demand and increase your market share and your revenue.
Before taking any action to grow your business, you will need to define your purpose – A company with a clearly defined purpose is more likely to experience growth, achieve greater customer satisfaction and retain talent.
Is your business ready for growth?
We can usually spot the signs that a business and its owners are ready to invest the energy needed to take it to the next level.
1 Your heart is in the right place
Owning and running a business takes its toll emotionally. Is your passion there for all to see, even after years of a 60-hour working week? If you answer yes, you are ready for growth.
2 You want to improve your work-life balance
60-hour working weeks! Yes, it may not sound good, but in many cases, accurate. Business owners often approach us wanting to rein in the time spent on their business, a good sign because they recognise a need to work more efficiently.
3 You know your strengths
Chasing big money contracts that involve non-core work can be distracting. Know where to focus your efforts and which new contract to take on. Accept that you can’t do everything yourself, so invest in new staff to help your business progress.
4 You can visualise your future
A business owner’s vision of the future is a great starting point to work from when developing a strategy and plan. Sadly, a lot of the time, the vision stays in the owner’s head. The ability to turn your vision into an achievable goal will give you a better chance of success.
5 You understand that you need a long-term commitment
The road to sustained success is often long and winding. Committing yourself, your family and your finances to this journey can be the most challenging element of business growth.
Small Business Growth
Turning a small business into a big one is never easy. The statistics are grim. Research suggests that the average turnover for a UK SME is £286k. Most businesses start small and stay there. Of course, there are examples of companies that have successfully transitioned from start-ups to small businesses to fully thriving large businesses. Growth strategies resemble a ladder, where lower-level rungs present less risk but less quick-growth impact.
The bottom line for small businesses, especially start-ups, is to focus on strategies at the lowest ladder rungs and then gradually move your way up as needed. As you develop your growth strategy, you should first consider the lower rungs of what are known as Intensive Growth Strategies. Each new rung brings more opportunities for fast growth but also more risk.
Types of Business Growth
Once you have committed to business growth and you have a good understanding of some of the factors that influence growth and development, you will need to decide upon the best route for achieving it.
There are two main types of business growth. Internal growth (also called organic growth) is when your business grows from within, for example, by ploughing back profits into your business every year.
External growth usually involves a merger of two or more businesses. A business may acquire or combine another company with another business to improve its competitive strength.
Organic growth may occur either through an increase in the sales of existing products or by adding new products.
This approach can be a slow process with comparatively little change to your existing organisation structure, or it can be accelerated by developing and executing a robust business growth strategy.
The Stages of Business Growth
Every business goes through four phases of a life cycle: start-up, growth, maturity, and renewal/rebirth or decline. Understanding what phase your business is in can make a huge difference in your business’s strategic planning and operations.
The Harvard Business Review categorise the five stages of small business growth as follows:
Stage 1 – Existence – In this stage, the main problems of the business are obtaining customers and delivering the product or service contracted for
Stage 2 – Survival – The business has demonstrated that it is a workable entity. It has enough customers and satisfies them sufficiently with its products or services to keep them. The key problem thus shifts from mere existence to the relationship between revenues and expenses.
Stage 3 – Success – The decision facing owners at this stage is whether to exploit the company’s accomplishments and expand or keep the company stable and profitable, providing a base for alternative owner activities.
Stage 4 – Take-Off – In this stage, the key problems are how to grow rapidly and finance that growth.
Stage 5 – Resource Maturity – The greatest concerns of a company entering this stage are to consolidate and control the financial gains brought on by rapid growth and, second, to retain the advantages of small size, including flexibility of response and the entrepreneurial spirit.
At this point, where do you think your business sits? Are you ready to embark on business growth and achieve great things?
Business Growth Strategies
Are you ready to take your business to the next level?
To achieve steady business growth, you will need to develop a robust and sustainable business growth strategy that will allow your business to break through to the next level.
Here are eight common growth strategies to consider; detailed information on each can be found here
1 Market Penetration
Sell more of your current product to your existing customers.
2 Market Development
Sell more of your current product to an adjacent market.
3 Alternative Channels
Sell your products via an alternative channel, e.g. online.
4 Product Development
Develop new products to sell to your existing customers.
5 New Products for New Customers
Sometimes, market conditions dictate that you must create new products for new customers.
6 Turn your services into products
Productise your services by developing a process, idea, skill, or service to make it marketable for sale to the public.
7 Turn your customers into subscribers
Automatic customers are the key to increasing cash flow, igniting growth, and boosting your company’s value. Subscription models – Download the white paper.
8 Create systems that can grow your business without you
Make your staff more autonomous and remove the company’s dependence on you. Download the definitive guide to standard operating procedures.
Increasing the value of your business will also help your business to grow. Five surprising ways you can boost the value of your business are 1) sell more stuff to more people, 2) achieve a 50%+ net promoter score 3) Create recurring revenue streams, 4) reduce reliance on customers, employees, and suppliers and 5) Find an acquirer. For more information, Download Five surprising ways to boost the value of a business
Creating Your Business Growth Plan
If you choose to follow one of these Growth Strategies, you should take only one step at a time since each step brings risk, uncertainty, and effort. The strategy you choose may be a natural extension of the business, or it may be the result of necessity. A well-defined business strategy is essential regardless of your path to grow your business.
We have devised a five-point action plan for developing a business growth plan that will help you achieve breakthrough growth in your business.
- Ditch your business plan – Although business plans have a place, the first step in our plan is to create a strategy, something that is living, breathing and inspiring to everyone in the business. Whereas business plans are primarily number-based, the strategy should start with your words and tell the story.
- Think about what’s in it for you – get selfish for once and ask yourself what you want out of the business. Setting your shareholder aspirations is the cornerstone of building a strategy to deliver your desired results.
- Build on firm foundations – what are your values? Why are they important to you? Your values should be the DNA of your business, what it is, what it stands for, and how it operates. Knowing your values is crucial to making the right decision when recruiting staff, as building a team with a common purpose will pay dividends many times over. For more information, read What is a purpose and why is it important.
- Know what business you are in – this may sound simple, but understanding what your customers buy and why is pivotal in a successful business. Take the example of Black and Decker; they sell power tools, etc. – but when a customer purchases a drill, they buy a hole in a wall. On the other hand, HMV failed to realise that customers purchased the music, not the CD, and subsequently fell foul of the digital download revolution.
- Are you ready to Break Big? – Step out of the “now” and visualise how big the opportunity in your market is. Not what you’re comfortable with, but what could you achieve? Setting this visionary goal will help you think like a bigger business and make decisions accordingly. Even if you only achieve 50-60% of this visionary goal, you will still be significantly further forward than if you continued to follow the pedestrian 10% year-on-year growth target many businesses adopt.
A business growth strategy is the foundation that will help your business grow, evolve, increase market share and respond to increased demand. The starting point, is considering the following four questions – the answers will be key in forming the basis for your business growth strategy:
- Do you understand your market?
- How big is the opportunity, and what products or services will you promote?
- Who are your most valuable customers?
- Who are your competitors for those high-value prospects and customers?
Get your staff onboard
You can host a staff engagement session and meet somewhere where you won’t be disturbed and outside of normal business hours. A good idea is to link the gathering to a night out, fun, and a celebration. We have facilitated these regularly for clients; the most successful ones are run as open discussion workshops.
Key points to share during the session.
Open the floor up and ask some open questions of your staff:
- How can we improve communication around here? Both internally and externally. Gather their ideas; write them down on a flip chart or ask them to fill in Post-it–notes and stick them on the wall.
- How do we improve the quality of our processes to ensure we continue with high levels of customer service in busier times?
- How do we grow the business? What are the key things we could do? There is no such thing as a ‘bad idea’, and there should be no judgment formed; let the ideas flow – there may be some gold nuggets hidden in there; chances are that your staff are closer to your customers, competitors, and the market than you are.
- How do we share the rewards of future growth based on improved communication, quality, and sales? Likely, the answers won’t be purely about money.
Once you’ve obtained staff input, you must implement some of the ideas. Some will be quick wins, and you will probably have thought of many ideas. Once your employees have observed that things have happened based on their beliefs, introducing change and giving them ownership becomes much easier.
A word of warning: the chances are that one or two of your existing staff won’t want to be part of your plans or may realise they could be asked to be accountable and, therefore, could potentially leave your business. In such circumstances, never make concessions, make room or build the business around these individuals. In the long run, you will be better off letting them go and filling any gaps by retraining or recruiting the right-minded individuals who match your core values and want to help you achieve your vision. Are your staff on the same page?
The next step in planning business growth is to project future income streams and gross margins. This may appear difficult in times of economic and social volatility, but it is possible to encompass such uncertainty into your plans and build safeguards to increase the likelihood that your business will survive into more stable times.
When working with small business owners, they often say, “I’ll be happy if we do the same as last year.” But that isn’t a plan as such; it’s more an acceptance that there’s nothing they can do to change their business performance and that their business growth is out of their hands. They may as well open their doors and see what happens!
“I can’t change the direction of the wind, but I can adjust my sails to always reach my destination.” – Jimmy Dean
A successful plan will mean that you can go to market with firm foundations in place, meaning that you’re less likely to stall in your tracks or set yourself up for failure. Establish real sales targets, share these with your team, and give them ownership and the tools to deliver. Ultimately, it’s about giving people accountability but ensuring you measure and follow up regularly, praise face-to-face, and manage any poor performance. If this sounds too tricky or something you’re uncomfortable with, then seek help from a professional.
Thereafter, continue to update and involve the whole team. Only by surrounding yourself with the best team possible and ensuring everyone buys into your vision will you create ‘goal congruence’, which will help you realise your personal and business dreams.
Set aside some time (at least half a day initially) in which you and your management and/or sales team can run through some exercises to better understand the marketplace, opportunities, and potential challenges over the next 12 to 18 months. Agree on actions.
2 Assess market forces
Step back and determine which market forces (drivers) are affecting your customers and, possibly, their customers. Are the social demographics within their area of influence changing? Are they growing or shrinking? Are the age profiles of their customers/end users changing?
What effect is developing technology having on your customers and their customers? Do you face stiffer competition due to cheaper manufacturing and automated delivery processes, or are traditional buying habits changing through utilisation and access to online information and social media?
Consider trends caused by economic fluctuations and the effect of currency exchange rates. Are these having a positive or negative effect on your own customer’s buying habits? BREXIT continues to cause uncertainty and delays to big-ticket item purchases.
Ensure you consider any political factors and their effects on the marketplace, from the ever-increasing turmoil, political unrest, or terrorist threats across the globe to new legislation that can close or create market opportunities. Remember how UK solar panel (PV) suppliers and installers experienced a huge drop-off in business when feed-in tariffs legislation changed?
3. Consider your customers
The next step is to look at your current customer base. Which sectors of industry or demographics are they operating in? Which companies and sectors will likely be the winners, and who could be the losers? If you don’t know, don’t assume; find out from your customers. What are their challenges and expectations for the future? An extended exercise of this phase is highlighting prospective customers in sectors you believe will prosper over the next few years and making this your hit list.
4 Know where your profits lie
Review your current product/service sales split against total sales revenue. Then, determine which revenue stream delivers the highest gross margins and which covers costs. Understand why there are differences. Are some services delivered by in-house labour rather than outsourced, or are the increases in purchase prices of material not being passed on to your customers? Highlight the products or services that generate a higher margin, as you need to promote and sell more of these. For the remainder, either review your prices or don’t promote them unless they are a strategic loss leader to obtain bigger opportunities.
5. Promote your low-hanging fruit
Focus on the areas in which to increase sales over the short term. For each existing customer, highlight what products or services they buy from you and, importantly, what they don’t buy. Ask yourself if you’re getting your ‘share of their wallet’ or if there are further products you could sell to them. What are your customers buying elsewhere that you could supply? Again, don’t assume; contact and revisit all your top customers, not to sell, but to raise awareness of your products and services and find out why they don’t buy these from you.
These are low-hanging fruit, and chances are, your customers don’t know you even offer them. If you carry out this process effectively, I wouldn’t be surprised if you increased sales revenues over the next 18 months by 18-20% and were more profitable too.
6 Aim and fire
Select five or six target customers from your hit list and draw up a plan to visit and market to these businesses over the next 12 months.
7. Forecast your sales
Start plotting numbers and setting targets for each trading month ahead. Start with a blank sheet of paper and set a realistic but stretched sales target for each month based on each product or service offered, and create separate invoice codes so you can measure and track.
Consider, if customer A only bought 50 of product X and five of service Y in 2021, what could they potentially buy in 2023?
And what other products and services could they buy throughout the next 12 months? Do this for each key customer and ensure that whilst you plot the sales revenue, you also tally the cost of sale for each month. Even if you only reviewed 80% of your existing customers, your sales prediction will be higher than your current year. Don’t forget seasonality; don’t be over-ambitious with obtaining new business from new customers. Ideally, you want a mid-range forecast rather than being too optimistic or reserved.
“The odds of hitting your target increase dramatically when you aim at it.”
You may have to review this exercise a few times, and it’s worth sharing the plan with your team before you agree on any actions.
Consider how an increase in sales will affect fixed costs and the capacity to deal with greater volumes. Do you need to spend more on marketing, staff and wages, warehousing, equipment, machinery, or plant? If so, allow for these in your forecast.
“Unless commitment is made, there are only promises and hopes; but no plans.” – Peter F. Drucker
Roadblocks to Business Growth
If you have embarked on business growth strategies, but you are struggling to grow your business, you may be stuck in the owner’s trap.
What would it look like if you were to draw a picture that visually represents your role in your business? Are you at the top of a traditional Christmas tree-like organisational chart, or are you stuck in the middle of your business, like a hub in a bicycle wheel? Are you able to leave the business for a month without serious repercussions? Do you need to be consulted whenever decisions are required?
If this sounds familiar, you are not alone. Most business owners and CEOs face this challenge at one time or another in the evolution and growth of their businesses.
Symptoms of being in the owner’s trap
1 Only you can authorise all the outgoing payments
What would happen if you’re away for a few days and an important supplier must be paid? Consider giving an employee signing authority for checks up to an amount you’re comfortable with, and then change the mailing address on your bank statements so they are mailed to your home (not the office). That way, you can review all payments and make sure the privilege isn’t being abused.
2. Your mobile phone bill is ridiculous
If your employees are out of their depth, it will show up in your mobile phone bill because staff will call you to coach them through problems. Ask yourself if you’re hiring too many junior employees. Sometimes, people with a few years of industry experience will be much more self-sufficient.
3. Your revenue is flat when compared to last year’s
Flat revenue from one year to the next can signify you are a hub in a hub-and-spoke model. Like forcing water through a hose, you have only so much capacity. No matter how efficient you are, every business depends on its owner reaching capacity at some point. Consider narrowing your product and service line by eliminating technically complex offers that require your involvement and instead focus on selling fewer things to more people.
4. Your holidays aren’t really holidays
If you spend your holidays dispatching orders from your mobile, it’s time to cut the rope. Start by taking one day off and seeing how your company does without you. Build systems for failure points. Work up to a point where you can take a few weeks off without affecting your business.
5. You spend more time negotiating than a union boss
If you constantly have to get involved in approving discount requests from your customers, you are a hub. Consider giving front-line, customer-facing employees a band within which they have your approval to negotiate. You may also want to tie salespeople’s bonuses to the gross margin for sales they generate so you’re rewarding their contribution to profit, not just chasing skinny margin deals.
6. You close up every night
If you’re the only one who knows the close-up routine in your business (count the cash, lock the doors, set the alarm), then you are very much a hub. Write an employee manual of basic procedures (close-up routine, e-mail footer to use, voice mail protocol) for your business and give it to new employees on their first day on the job.
7. You know all your customers by their first name
It’s good to have the pulse of your market, but knowing every single customer by first name can be a sign that you’re relying too heavily on your personal relationships being the glue that holds your business together. Consider replacing yourself as a rainmaker by hiring a sales team, and as inefficient as it seems, have a trusted employee shadow you when you meet customers so that, over time, your customers get used to dealing with someone else.
8. You get all the freebies
Suppliers’ wooing you by sending you free tickets to sports events can be a sign that they see you as the key decision-maker in your business for their offering. If you are the key contact for any of your suppliers, you will find yourself in the hub of your business when it comes time to negotiate terms. Consider appointing one of your trusted employees as the key contact for a major supplier and give that employee spending authority up to a limit you’re comfortable with.
9. You get cc’d on more than five e-mails a day
Employees, customers, and suppliers constantly cc’ing you on e-mails can signify that they are looking for your tacit approval or that you have not clarified when you want to be involved in their work. Start by asking your employees to stop using the cc line in an e-mail; ask them to add you to the top line if you really must be made aware of something – and only if they need a specific action from you.
If some of these symptoms apply to you and your business, chances are you have been too busy running the business and have had to prioritise your activities while relegating the non-critical activities to your to-do list. Are you sure you have not had anything critical fall through the cracks?
To grow your business, you need to remove the dependency on you!
Try introducing functional leaders for the main business functions, typically marketing, sales, delivery, and finances. These people’s expertise level does not have to be particularly high, but the team dynamics must work. Step back and act as a coach for them. Many founders find this difficult and micromanage, thus removing the advantage the functional managers should give.
If you succeed in stepping back, your business is set for take-off to scale up. A focus must be maintained on profitability to finance the growth; chasing turnover to grow is pure vanity and will lead to failure. The change can occur either organically, by merger, or by acquisition. With the new-found time the owner has, they should now be in a good position to think strategically to control the growth and watch the finances simultaneously.
If you suffer from any of these symptoms, take our Value Builder Score and determine how this impacts your business. You will also get a 28-page report with suggestions on escaping the owner’s trap. Take our Value Builder score!
Approximately half, 82% of Small to Medium Enterprises (SMEs) fail due to cash flow issues, report Score.org cash flow problems are likely to be a major reason to hold back business growth plans.
Here are 12 tips on how to effectively manage your cash flow. More information can be found in our article Managing your cash flow
- Be clear and agree to your payment terms upfront before doing any work.
- Invoice products and services as soon as you can
- Know your customer’s payment process
- Offer discounts for prompt payment.
- Protect yourself against bad debt.
- Chase debtors.
- Don’t offer your customers extended terms.
- Understand your tax liabilities.
- Pay your suppliers on time.
- Have a good relationship with your bank.
- Don’t tie up all your cash in assets
- Don’t chase turnover; chase margin!
Using a Business Growth Consultant
We hope that has motivated you to think about some things you need to implement and consider achieving business growth. If you feel overwhelmed by these considerations, that’s normal; no one can fulfil their aspirations without help and guidance.
If you are serious about growing your business, getting more customers, and increasing your profits, it’s worth considering working with a business growth consultant to ensure you hit the big time.
A business growth consultant will help you review where your business is now, recommend the best growth strategy for you, help you develop a robust growth plan, and help you implement it.
You will also receive guidance, have someone to bounce ideas off, and someone to talk to in confidence, and with this level of expertise and support, you will be better placed to reach your full potential and achieve your goals and aspirations.
The Benefits of Using a Business Growth Consultancy
Whether running a small or large business, being the boss can be lonely. Cash flow, decision-making, staff management, balancing boundaries, and keeping confidence are all factors that leave business owners feeling isolated.
Working with a business growth consultancy includes confidence booster, a sounding board, being challenged, improving your business knowledge, helping you become a better leader, problem-solving, better relationships, and achieving business growth.
Business Doctors have been helping businesses like yours for nearly two decades and have business advisors throughout the UK and Europe. If you are seeking business growth and you want to give yourself a better chance of achieving it, please get in touch.
Author’s note: The information in the Ultimate Guide to Business Growth has been compiled from the Business Doctors network and partners Value Builder.