Great business ideas alone do not guarantee success in the long run. They may have gotten the business up and running, but business owners cannot keep banking on just potential. They have to take continuous action to keep growing further.
Scale-ups and SMEs, particularly, need to consider their next steps to sustain growth. If your business is at this stage then having a specific business growth strategy in mind will help you achieve your goals. Because while you have the drive to take your business from Point A to Point B, a growth strategy provides the roadmap for “How do I get there?”
The writers at Harvard Business Review studied the retail industry’s strategies to sustain business growth. Those that decided to open 4.4% more stores garnered a below-average stock market performance compared to the ones that opted to expand to only 2% of more stores. The group that opened fewer stores and focused on scaling up in their current market was able to achieve above-average stock market performance.
This goes to show that it’s not enough to just have any business growth strategy since some strategies work better than others. A lack of a clear and strong growth strategy can mean that your business will struggle to thrive in the long run.
How do you formulate an effective growth strategy?
At this point, if you’re a member of the board, you know for a fact that an effective growth strategy of the business has a high dependency on you and the rest of the board members. Since you’re not blindly testing the waters anymore and have a strong grasp of how your business and the market work, you can create your growth strategy with specific and measurable objectives. And to do that, you will need growth metrics.
Determining your growth metrics and staying on top of them is important to a strong growth strategy because it enables continuous development of tactics directly aligned to achieving the chosen metrics.
Using Ansoff’s Box is a good tool to help you do so. It plots four simple growth metrics — market penetration, product development, market development, and diversification — and the optimal conditions to use each for expanding your business, which can help you see the various directions your business can venture into.
The 4 Key Metrics of Growth
1. Market Penetration
While gaining a significant portion of customers who prefer your products and services over others is a great accomplishment, you should not let your guard down. The competition will be tougher because to maintain your position, you have to watch out for smaller companies, and to advance your position, you’ll be going up against bigger and stronger companies.
Looking at your business’ market penetration can let you see where you currently stand in the market. You can see the overall competitive landscape — which competitors to monitor and study, how your products or services compare to them, and what opportunities you can grab to entice their customers. With information like that available to your Board and business strategy, you can develop targeted moves to raise your business’ market penetration.
2. Product or Service Development
As your business is progressing, gaining more sales, and getting bigger, you also have lots more resources than when you started. You can take advantage of this by identifying product development as a metric.
Even if your products are doing relatively well, your business can generate more sales and ensure customer loyalty by developing innovative products or services they will want. With several things changing like the environment, technology, and trends, your customers may not always have the same level of satisfaction with your products and services. Eventually, their needs may change or they will want more of what you have to offer. You need to respond to their demand because if not, they are likely to look for alternatives elsewhere.
3. Market Development
After strongly establishing your product and services to your customers, you can make your business grow even more by selling your products and services to new markets — different age groups, areas, or segments.
With market development, you are expanding your pool of potential customers, allowing you to sell to more people and garner a greater market share. You will just need to find a way to align with the new market’s needs so that the value of your product or service will extend to them.
Businesses can boldly move into a new market with new products if they have the capability and appetite to pursue diversification. Scale-ups and SMEs can start thinking about this type of metric because they have already established themselves in their current market with their products and can look for exponential growth in exploring something entirely new.
If done right, this can produce greater profitability since a wave of customers and income will come from a new stream. This metric also allows for your company to touch on territories that you once considered foreign.
Which metrics should your business focus on?
While Ansoff’s Box can guide you in the right direction, there is no one answer for all businesses because many factors need to be taken into consideration, in the same way, that no single advisor or consultant can possibly advise you on everything your business needs. Because of this limitation, a deeper understanding of the business’s needs in relation to a full context is necessary to identify which of these metrics (or perhaps which combination of these metrics) you’ll need to pay attention to.
Scale-ups and SMEs specifically have the challenge of identifying the areas where they may be lacking growth or overlooking opportunities. Certainly, some existing metrics and strategies are working, but to ensure that it is ideal for the long run, business owners may need to decide on focusing on one metric of growth or implementing a distinct mix at the same time.
If you are finding it difficult to focus on the right strategy for your business you could enlist support from someone with an objective and external perspective of your business and industry. This kind of support can help you visualize all the aspects you need to consider in identifying your areas for growth and their corresponding metrics.
How to put these metrics into action?
Once you have chosen the metrics that are ideal for your business growth, create strategies and tactics aimed to achieve them. Remember that business growth strategies have to be constantly in line with your growth objectives, the business climate, and other relevant factors.
As those things change, it is imperative that you conduct a regular assessment of your metrics to see if your strategy is still effective or if you need to make some adjustments. A quarterly review of tactics and 6 monthly reviews of your strategy will help to keep you on track.
An initial Strategic Review, whether done internally or facilitated by an advisor will set you along the right track and the regular reviews will keep you accountable. In the end, achieving the growth for your business by looking for viable options will be key. After all, a business is only as good as its strategies and those who conceptualize and implement them.
John Courtney is the Founder and Chief Executive of BoardroomAdvisors.co which provides part-time