Most start-ups and young businesses have a similar growth curve. Their initial months are financially restrictive with most balance sheets being blood red in colour and implication. This is followed by a null period where everything is balanced out as if nature itself is controlling the fates of the business.
After this, however, the generic pattern diverges from one business to another. Some businesses show massive growth rates in revenue, income, and market share, some show mediocre growth rates, some struggle to maintain the breakeven patterns, while the majority crash and burn.
The difference between all these businesses is their business growth strategies. The period after a new business breaks even is incredibly vital to not only the near term but also the medium term and long term futures of the business.
What this means is that if you choose the wrong business growth strategies then you’ll end up with a perpetually struggling business and will have to be in a constant fire fighting state. So, which business growth strategies should you be choosing for your business? Here are some of your options.
Business Growth Strategies #1: Market Penetration
Market penetration is one of the most commonly used business growth strategies, especially when it comes to small to medium scale businesses. A business employing this strategy is essentially trying to tap into an existing market that is dominated by products or services from other businesses.
The trick here is to offer a similar product or service with some added Unique Selling Point (USP) to eat into the market share of all the other players in the market. Most markets in most sectors tend to be, more or less, saturated with service providers and product manufacturers.
This is why the vast majority of start-ups rely heavily on market penetration as opposed to other business growth strategies to not only establish themselves in the market but also consolidate their position.
Typically, the USP that start-ups try to leverage when using business growth strategies such as market penetration is lower prices. They reduce their profit margins or find a more cost effective manufacturing system to beat their more established competitors on pricing. Even though pricing is the primary ploy used by most companies on such business growth strategies, there could be some examples of features based USPs as well.
Business Growth Strategies #2: Market Expansion
Markets can be defined in various ways. They can be defined by specific demographic and psychographic parameters of the consumers or they can be defined by geographical parameters. The variables used to define a market are essentially infinite.
Understanding this is important if you want to understand business growth strategies such as market expansion. Market expansion basically means adding another type of market to the market that your business is currently operating in.
For instance, you could be operating in a particular city, region, or country only to realise that there is a separate city, region, or country where you can sell your products or services also. When you tap that new market, then your business can be said to be employing market expansion business growth strategies.
Market expansion becomes relevant even when a business realises new applications for its existing services or products. For instance, a Point of Sale service provider may realise that his existing software can be modified or tweaked slightly to become relevant in supply chain management. This service provider can then choose to target manufacturers with the aim of selling them his software service.
There are many other parameters that can be used as the market expansion foundation to create business growth strategies down the same principles. The secret is to think outside the box and beyond the existing reach of your business.
Business Growth Strategies #3: Product Expansion
Product expansion business growth strategies, as you’ve no doubt already surmised, revolve around the product portfolio of a business. Like all other business growth strategies mentioned in this post, product expansion can also be done in a wide variety of ways.
The most obvious is for a business to expand its product line to include newer products. This means stumping up profits towards product development. Typically, the new product or service being developed is complementary to the existing products or services being offered so that the existing customer base can be leverage towards improving profits.
However, on occasion, a business may be forced towards more drastic measures. In such scenarios, the company ends up developing a whole new product or product line to replace their existing product or product line. This is very common in technical fields because technologies get obsolete very fast these days.
Moreover, there are occasions when a business may choose to go farther afield and direct its product development efforts towards a completely different sector or industry. The idea here is to use the existing skill set of its workforce and apply it to a different industry. However, such business growth strategies aren’t exactly counted as product expansion strategies. They are instead known as diversification strategies.
Business Growth Strategies #4: Sector Diversification
Sector diversification business growth strategies tend to be much more elaborate and expansive than all the others we’ve already mentioned. These types of business growth strategies essentially incorporate each of the three aforementioned strategies.
If a business is trying to diversify, then it will develop new products, find new markets, and then try to gain a decent market share in that market. Diversification business growth strategies are exhaustive which is why they are only implemented by businesses that have either maximised their reach in their existing market or have given up because they’ve hit a wall in their respective markets.
As is obvious, diversification business growth strategies are so elaborate that they’re usually only implemented by large businesses. Because of the scale at which diversification business growth strategies are employed and the kind of resources they required, small to medium scale businesses need to be incredibly careful while considering them.
If and when a small or medium scale business does try to diversify, it should only try to do so after a thorough research of the new market.
Business Growth Strategies #5: Expertise Acquisition
Expertise acquisition business growth strategies are as expansive and expensive as diversification strategies. Expertise acquisition strategies are usually used by the bigwigs of business and tend to typically be beyond the reach of most small to medium scale businesses.
These types of business growth strategies require buying another company or a division of a company to gain expertise in a specific area. For instance, a printing aftermarket player such as Ninestar – Apex acquiring the printing business of an Original Equipment Manufacturer (OEM) such as Lexmark can be considered to be expertise acquisition.
The reason for this is that if Ninestar – Apex acquires the printing division of Lexmark, then it gets their manufacturing expertise, patents, and their brand value. Because acquiring such specialised expertise and rights is so expensive, such strategies are beyond most small to medium scale businesses.