According to statistics, only one in three small firms survive for more than ten years and about half of them collapse within the first five years. These figures are depressing, but they also provide some optimism. Owning a business entails risk, but there are strategies to increase your chances of success.
Having the appropriate business growth plans and being aware of the stage of growth you’re in will help your company not just survive but also thrive.
Simply said, a business growth strategy is a set of techniques or actions you do to advance your company from one stage to another. Different people will interpret business growth differently. Others view it as the opening of a new location or a market expansion, while some see it as a growth in sales and revenue.
Your business growth plan should be based on market research regardless of how you define growth. You must take into account your company’s organizational structure, the goods or services you provide, and your target market. Along with a schedule to track your progress, you should also list your short- and long-term objectives for various stages of business growth, as well as the growth techniques you plan to employ at each stage.
5 Stages of Small Business Growth
The majority of today’s large corporations had humble beginnings and didn’t grow to be huge overnight. Instead, to get to where they are now, they went through a series of stages of evolution across time.
The majority of organizations experience five stages of growth, each with its own opportunities and difficulties. According to the type of business and other variables, some businesses may undergo all five stages of the so-called “business life cycle,” while others may only go through a few.
You’ll be able to select the appropriate business growth techniques to move to the following stage once you determine the current growth stage of your company.
Stage 1: Seed and development
Your new business starts at this stage while it’s still an idea you’re exploring and fine-tuning. In this stage, you’re doing a lot of market research and asking questions to verify and determine whether your business idea is a good one that will attract customers.
Stage 2: Startup
In this phase, your new business is open, and you’re starting to attract new customers. This is also the time when you may begin to encounter unexpected issues with customers, cash flow, or your day-to-day operations. The startup stage is about survival and adaptability, so it’s crucial to adjust and figure things out as you go until your business achieves some form of stability.
Stage 3: Growth and establishment
At this stage, a new business is generating a steady income with a growing customer base. However, the business may be finding it tough to break even. The focus here is to improve your bottom line as quickly as possible—perhaps it’s by hiring qualified employees, investing in equipment, increasing productivity, or reducing waste.
Stage 4: Expansion
Businesses at this stage have become stable, profitable, and established in their industry. But expansion is hardly the time to sit back and relax. In this stage, business owners typically explore other opportunities. For example, it might mean getting a bigger share of the market through partnerships, new product development, or franchising. The goal in this phase is to expand but to do so without overextending yourself (or your resources).
Stage 5: Maturity and possible exit
In the maturity stage, a business has shown steady profits year after year. For some business owners, this is the right time to exit the business by selling it or handing it over to a new CEO. For others, this might be the time to come up with a new expansion strategy for the business.
Small-Scale Business Growth Strategies
Every business growth plan has its own amount of risk and is effective at different phases of growth. These business growth strategies mentioned below will help you position yourself for success.
1. Market penetration
This growth strategy primarily aims to increase market share by selling more of your existing products or services in your current market. It’s a low-risk strategy that many small- and medium-sized businesses use.
Here are some market penetration strategies:
- Charge lower prices compared to the competition
- Attract new customers with special offers and discounts
- Encourage current customers to buy more with volume and bulk discounts
- Increase the number of distributors and dealers your business uses
2. Product expansion
This growth strategy involves marketing new products and services in your existing market to capture a larger share of the market.
Examples of product expansion include:
- Creating varieties of an existing product; for example, a soft drink company that produces its main soft drink in different flavors
- Updating an existing product when the features are no longer attractive to potential customers
- Introducing a new product line to your business
- Bundling your services into different packages and tiers
3. Market development or expansion
For a growing company struggling to find its feet in the current market (maybe due to stiff competition), market development is a growth strategy that can help.
Also known as market expansion, it involves selling existing products and services in a new market to increase market share. For best results, you need to have thorough market research to gain a solid understanding of the new market and its customer base.
A few examples of market development include:
- Selling your products or services in another state or country
- Selling to a different group of users or target audience
- Franchising, by giving franchise opportunities to other businesses or individuals
4. Market segmentation
This business growth strategy divides a market into different segments, such as geography, demographics, market behavior, or customer behavior. If you’re a small business operating in a market filled with bigger competitors, this growth strategy can help. By segmenting the market, you can identify and focus on a sector that your competitors haven’t successfully reached.
5. Alternative channels
Using alternative channels is a popular business growth strategy for small businesses, especially in the digital age. It involves using another channel or platform to promote your business, connect with customers, and sell to them.
Examples of alternative channels include:
- Selling online through your website
- Claiming your Yelp Business Page
- Selling through platforms like Amazon, Etsy, and eBay
- Using paid search ads to promote your business
- Selling through wholesalers when you typically sell through retailers
This is a business growth strategy where two or more businesses decide to join forces for mutual benefits and gains. Based on the nature of your small business, partnering with another company can help you manage a big project with ease, or even transfer knowledge, skills, and technology with little or no cost attached.
If your business involves dealing with suppliers and distributors, you can also explore partnership opportunities with them.
For a successful partnership, look for a business that isn’t a competitor but has a business culture and brand values that are similar to yours. Also, consider the reach and reputation of proposed partner businesses so you can weigh the benefits.
Diversification is a growth strategy where new products and services are sold to new markets. This growth strategy comes with a high level of risk. There are significant financial resources needed to pull it off, but it can also generate high returns.
Different types of diversification include:
- Horizontal diversification: This involves creating a new product line for your current customer base
- Vertical diversification: This happens when a business starts competing with some of its suppliers or customers
- Concentric diversification: A situation where a company creates a new product or service that’s similar or related to an existing product or service
- Conglomerate diversification: In this case, new products or services are designed for a different target audience
8. Acquisitions and mergers
With this growth strategy, a business can purchase another business (acquisition) or two companies can decide to merge as one (merger). Because of the amount of resources usually required, it’s seen as a growth strategy for mature businesses.
Here are three different types:
- Upstream acquisition: In this case, a smaller business merges with a bigger one to form one business
- Downstream acquisition: This is when a business purchases another and the acquired company becomes a part of the purchasing business
- Lateral acquisition: This occurs when two companies of about the same size decide to form a bigger business
9. Cost reduction
Cost reduction is a business growth strategy to improve your bottom line and make more funds available for growth. When you keep business costs low without sacrificing quality, your business will likely survive and grow.
Here are some cost reduction strategies to consider:
- Use accounting software to track expenses
- Go paperless as much as possible
- Evaluate all your business processes and consider automation where feasible
- Reduce traditional marketing methods, and direct most of your marketing efforts online
- Consider outsourcing when necessary
- Time is money, so encourage efficient time management practices in your business
10. Customer retention
As a growth strategy, customer retention is about how you nurture and convert both existing and new customers into repeat and loyal customers. For this to work, you need to gain your customers’ trust.
Retaining customers can lower your business costs because it’s cheaper to keep customers than gain new ones. Repeat customers are also more likely to spend more, and loyal customers who share about your brand through word of mouth can be a vital part of your business growth.
You can build customer trust and retain customers when you:
- Communicate regularly with your customers through personalized emails and social media
- Over-deliver on every promise you make to a customer—for example, making home deliveries within 24 hours when you promised 48 hours
- Express customer appreciation with loyalty discounts, free gifts with purchase, complimentary service upgrades, and other thoughtful gestures
- Get regular feedback from customers through surveys, questionnaires, and user reviews
- Reward loyal advocates and ambassadors for every new customer they refer to your business
- Provide an excellent customer service experience through live chat, self-service, or phone support
11. Online marketing
Online marketing refers to all marketing efforts carried out online to advertise your business to the general public. This type of marketing connects you with more people, including your target audience.
Research shows that there are almost 4.57 billion active internet users worldwide. As such, online marketing is a powerful tool and an attractive growth strategy for small businesses.
You can grow your business using the following online marketing strategies:
- Create a business website: Having a site adds credibility to your brand and keeps your business open 24/7.
- Engage on social media: There are lots of social media sites, but you don’t have to be active on all of them to grow your business. Instead, identify where the majority of your target audience can be found and create a social media marketing strategy to guide you.
- Be active on review sites: On review sites, users search for businesses, rate them, and post reviews. When you create your business page and become active on review sites like Yelp, your small business can be found more easily online. It also lets you connect directly with existing (and potential) customers by replying to comments, adding photos, and sharing up-to-date information.
Despite the fact that many small businesses fail during the first five years, millions of others continue to prosper over time. Applying the appropriate business growth tactics is essential to assisting your organization in thriving, in addition to commitment and ethical business practices.
You’ll be better prepared to select the best business growth tactics to go to the following phase if you can pinpoint the current growth stage of your company—from seed and development to maturity.
The 11 options presented in this article are a good place to start and will help you approach business growth in real-world, simple-to-follow steps, despite the fact that the sheer number of growth tactics could make your head spin.