Be Cautious in Considering Company Growth Strategies

Growth opportunities come in a variety of forms. Chaos results from entrepreneurs taking on too many growth strategies at the same time. Also, a great deal of energy and resources can be wasted if an entrepreneur has not paused long enough to recognize which growth dynamics are already in force.

First Consider Growth in Your Current Market

A business can expand its horizons by modifying some of its approaches in an already established market. New products introduced to existing customers is a good idea for businesses that have long marketing/selling cycles. If the company has a good reputation, its customers will consider purchasing new goods more readily than consumers who are unfamiliar with the company.

Improved customer service or quality control can increase the average order size, the percentage of repeat business, and the number of referrals. It may sound obvious at first, but it’s important to communicate the new improvements to existing customers. If they have not purchased products or services from you recently, they will not know how much better you are today. Plus, many people are simply too busy to notice improvements if you don’t point them out.

Growth within a business’s existing market can also come through increased control over the channels of distribution or suppliers related to the product lines being offered. Joint ventures are often preferable to merging or acquiring distributors, retailers and exporters. Entrepreneurs who are considering the acquisition of their key vendors need to cautiously approach this option since recent studies have revealed very discouraging results.

Nowadays, business owners more freely consider the acquisition of competitors within their market, but like the acquisition of vendors and distributors, I suggest caution since the complexities of mergers and acquisitions seem to be underemphasized in the media. It can be a costly, distracting, complicated, time-consuming process. The buyer often doesn’t end up with what he thought he was buying especially when key people at the acquired business resign.

Perhaps the most intelligent, least disruptive way to go for growth in an existing market is to improve marketing efforts. Many businesses are well-kept secrets. If the public knew how good you actually are, it would buy more.

If The Existing Market Shows Too Little Growth Potential, Try A New One

Growth into new markets can also be accomplished through improved marketing efforts. The addition of a newsletter, expansion of the categories on your mailing list, and targeted telemarketing or direct-mail campaigns are examples of techniques used to expand beyond an existing market.

Franchising and/or licensing is another growth strategy available to a business seeking expansion beyond an established market. Companies that have systems that can be replicated, taught and controlled are often the best candidates for franchising.

A business can grow beyond its current definition of its market by expanding geographically. It is usually a good idea to try and find a region with demographic features similar to the existing customer base. There will be new laws to learn, subtle regional differences, networking to be done, increased costs to be absorbed, etc.

The existence of business-service centers has helped service-oriented businesses expand geographically in recent years. The HQ chain is perhaps the best known of the flexible office space complexes in which conference rooms, fax machines and photocopiers are leased on a per-use basis. A firm can keep down its overhead while testing its capacity to attract and handle business in a new location. These centers have increased the number of firms engaged in international trade.

Diversification

I have found that most companies fare better by expanding through specialization not diversification; they need to establish a reputation to have a market position. Success breeds success if they know who you are. When businesses have too many products too early, they can end up known for nothing.

To minimize the problems associated with being a “jack-of-all-trades, master of none,” many businesses can grow by combining specialization and diversification by applying their base technology across a range of products or markets.

Ultimately, businesses grow through unrelated diversification and/or investments outside the identity of the base company. Many business owners build their financial base by acquiring real estate. It’s important to recognize that such a purchase represents the entry into a second business rather that the expansion of the first. Widely diversified companies are often really multiple companies that have not gone through the formal process of officially separating from one another. Growth can accelerate once separation is accomplished because each enterprise can then have its own focused marketing effort.

Consolidation Is A Growth Option

Most businesses can’t sustain continuous, uncontrolled growth. At some point, they must slow down and focus more on management, efficiency, ratios, etc. During these periods of assessment, they can realize growth from improved profits, reduced waste, controlled inventories, and decreased turnover.

 

Known as The Growth Strategist®, Aldonna R. Ambler, CMC, CSP helps rapidly growing midsized companies (typically $20 – 200 million/year) realize their goal of Achieving Accelerated Growth With Sustained Profitability® through opportunity/resource analysis, executive coaching, strategic working sessions, and her intermediary role regarding growth financing. Her clients are among the brightest, most ambitious business leaders whose names now appear on published lists of the fastest growing privately held corporations. The recipient of 23 prestigious awards for her success as an entrepreneur and industry leader, Ambler hosts a peer-to-peer Internet radio program, aptly called The Growth Strategist®, which features lively interviews with CEOs of midmarket companies who have successfully executed the growth strategy of the week. She can be reached toll free at 1-888-Aldonna (253-6662), by e-mail at Aldonna@AMBLER.com or online at www.ambler.com.

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