Choosing the right strategy to take your business to the next level can be tricky. We take a look at some tried and trusted growth strategies and consider the advantages and disadvantages of each.
Growth strategies - taking your business to the next level
Growth typically boils down to either developing new products or finding new customers to grow your share of market and increase sales and profitability. Whilst finding the right strategy to help you do this will depend on what type of service or product your business offers, your ability to access finance and the skills you can use, there are some more general issues to consider.
New product development
Pursuing growth through developing new products or product extensions may require upfront investment in R&D, core skills and plant and machinery but can help you secure new income streams for your business. Diversifying your product range can help boost stability (think 'not putting your eggs into one basket') and offset or extend the natural product lifecycle. It can also help you explore new markets and potentially reinvigorate your business.
Widening your customer pool, domestically or internationally can increase sales and longer-term profitability. Factoring in potential increases in sales and logistics costs and capital investment required to meet higher demand is crucial. Expanding domestically may be a safer option, but there is significant support available for businesses wanting to begin or grow exports.
Despite continued Brexit uncertainty, there are great opportunities for British businesses in Europe and beyond. The depreciation of the pound is increasing the competitiveness of UK goods overseas and demand is strong. Making exporting a part of your growth strategy can take many forms - from selling online to establishing an overseas outlet.
Although the upfront investment of time and money in researching potential markets and getting to grips with the legal, regulatory and cultural differences may seem prohibitive, the potential for growth can be significant.
For example, 51% of SMEs have experienced a rise in profits as a result of exporting. Read more
Working together for growth
Collaborating with other businesses informally or through a more structured agreement, such as a joint venture, can create a robust platform for growth by enabling you to access a wider range of skills, new technology and customers, for example.
An increasingly attractive option for businesses looking to grow, CitySprint's survey of UK SMEs found that 85% are collaborating with other businesses. What's more, if you're considering overseas growth, joint ventures are the only or preferred route to market entry in some territories.
Although sharing resources can lower your cost base and help to increase capacity, if you're relying on this as the basis for your growth strategy, it's worth formalising an agreement. That can help manage expectations, reduce conflict and outline the objectives that you and your partner are working towards.
Some of the best known brands have grown through franchising, making this a proven business model to help businesses expand quickly. Whilst it's not suitable for every business, according to the British Franchise Association, the number of people employed in franchising has grown by 70% over the past 10 years, with 97% of franchisee-owned units reporting profitability.
Establishing a franchise can be a great way to incentivise staff and provides an opportunity to scale your business for a relatively low capital outlay. However, the profits you earn from each franchise will obviously be lower than if you owned each business/subsidiary outright and you must make sure you're comfortable with the loss of control aspect of franchising.
An obvious way to grow your business is to buy another one, either to extend your product range, secure new customers or access new technology or skills. Done well, acquiring a business that complements your own can deliver a number of synergies. Executed badly, and it can lead to culture clashes, mounting integration costs and potentially scuttle the purchasing firm.
To succeed, you need clear objectives before researching whether acquiring the target is the best way to achieve that. A full and objective risk assessment and thorough due diligence is vital, as is upfront access to realistic levels of capital and an understanding of your working capital position and how this will be impacted. Ensuring you and your team have the skills, time and any technical expertise to make the acquisition work will also boost the chances of success.
Choosing your path to growth
There are advantages and disadvantages to each and every route you can take to achieve that step change in growth for your business. Understanding these allows you to choose the most appropriate strategy for your business, to mitigate the downsides and pursue the advantages to secure the opportunities of growth.
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