A business growth plan is not rocket science, there are numerous approaches that guide a company in this term.
It’s never easy to grow a small business into a large one. The figures are bleak. According to research, just one-tenth of one percent of businesses will ever attain revenue of $250 million. Only 0.036 percent of the population will generate $1 billion in annual sales.
To put it another way, most firms begin small and grow from there.
But if that isn’t enough for you—or if you know that being small doesn’t guarantee your company’s survival—there are companies out there that have successfully transitioned from start-up to small business to fully-functioning giant corporations.
That was the concept of Keith McFarland’s search for his book, The Breakthrough Company, which he conducted as an entrepreneur and former Inc. 500 CEO. “There have always been a lot of books out there on how to run a major organization,” says McFarland, who now owns his own consulting firm in Salt Lake City, McFarland Partners. “However, I couldn’t find one that explained how to sustain rapid development over time, so I looked into organizations who had done it and learned from their mistakes.”
Creating a business growth plan
Part of getting from point A to point B, then, is putting together a growth strategy that, according to McFarland, “brings you the most results with the least amount of risk and effort.” Growth strategies are similar to a ladder, with lower-level rungs posing less risk but possibly less quick-growth impact. The bottom line for small firms, particularly start-ups, is to concentrate on the techniques at the bottom of the ladder and work your way up as needed. When it comes to establishing your growth plan, you should start with the lower rungs of the Intensive Growth Strategies ladder. Each new rung opens up more potential for rapid advancement, but it also increases the risk. They are as follows:
Penetration of the market
According to McFarland, the least hazardous growth strategy for any company is to simply sell more of its present product to existing clients. This is a method developed by huge consumer products corporations. Consider how you may purchase a six-pack, a 12-pack, and finally a case of beverages. “These days, you can’t get toilet paper in anything smaller than a 24-roll box,” McFarland jokes. Another method of market penetration is to find new methods for your clients to utilize your product, such as turning baking soda into a refrigerator deodorizer.
The next step is to figure out how to sell more of your present product to a nearby market—for example, offering your product or service to people in another city or state. Many of the major fast-growing corporations of the last few decades rely on Market Development as their primary growth strategy, according to McFarland. Express Personnel (now known as Express Employment Professionals), a staffing firm founded in Oklahoma City, swiftly expanded across the country through a franchising strategy. In the end, the company provided employment staffing services in 588 different locations, making it the fifth-largest staffing firm in the United States.
This expansion approach entails seeking clients in novel ways, such as selling your products online. Apple was pursuing an Alternative Channel strategy when it added its retail division. Another Alternative Channel method is to use the Internet to give your customers new ways to access your products or services, for as through a rental model or software as a service.
Product development is the process of creating new products
It’s a tried-and-true strategy that entails creating new products to offer to both existing and new clients. If you have the option, you should market your new products to your existing clients. This is because selling to your existing consumers is significantly less dangerous than “learning a new product and market at the same time,” according to McFarland.
New Customers, New Products
Market conditions sometimes necessitate the development of new products for new clients, as Polaris, a recreational vehicle manufacturer based in Minneapolis, discovered. For many years, the company only made snowmobiles. The corporation was then in severe trouble following many mild winters. Fortunately, it created a hugely profitable line of four-wheel all-terrain vehicles, creating a whole new market. When it came to introducing the iPod, Apple used the same method. The iPod was a game-changer since it could be marketed independently of an Apple computer while also introducing new customers to the company’s PCs. According to McFarland, the iPhone had a similar effect: if people liked the appearance and feel of the product’s interface, they were more likely to buy additional Apple devices.
If you choose to adopt one of the Intensive Business Growth Plan, you should only climb one step up the ladder at a time, as each step comes with its own set of risks, uncertainties, and effort. The problem is that, in some cases, such as with Polaris, the market pushes you to act as a measure of self-preservation. According to McFarland, there are moments when you have no choice but to take additional risks.
Integrative Growth Strategies: Developing a Growth Strategy
If you’ve completed all of the phases in the Intensive Growth Strategy path, you can go on to Integrative Growth Strategies or acquisitions. The issue is that around 75% of all purchases fail to achieve the value or efficiency that was expected. A merger can go horribly wrong in some situations, such as when AOL and Time Warner merged. When it comes to adopting an Integrative Growth Strategy, however, there are three potential options. They are as follows:
This expansion strategy would entail purchasing a competitor’s business or business. Using such a strategy not only accelerates your company’s growth but also removes another impediment to future expansion: an actual or potential competition. Many breakthrough firms, according to McFarland, such as Paychex, a payroll processing company, and Intuit, a provider of personal and small business tax and accounting software, have purchased significant competitors throughout the years as a method to speed up product development and expand market dominance.
Buying one of your suppliers as part of a backward integrated growth strategy would provide you with more control over your supply chain. This could help you develop new items more quickly and at a lower cost. Fastenal, a firm situated in Winona, Minnesota that distributes nuts and bolts among other things, decided to purchase numerous tool and die makers in order to offer custom-part manufacturing capabilities to its larger clients.
Buying component companies that are part of your distribution chain might also be a focus of acquisitions. For example, if you were a clothing company like Chicos, based in Fort Myers, Florida, you could start buying up retail outlets to push your goods at the expense of your competitors.
Diversification is an important part of developing a growth strategy
Diversification is a type of growth strategy that was prominent in the 1950s and 1960s but is significantly less common today. Diversification is when you increase your company by purchasing another firm that is completely unrelated to yours. Massive conglomerates like GE are essentially holding corporations for a varied range of businesses that are judged mainly on their financial success. That’s how GE was able to have a nuclear power division, a railcar manufacturing division, and a financial services division all under one roof. According to McFarland, this type of growth plan is rife with danger and issues and is rarely deemed viable these days.
How Will You Grow? Developing a Growth Strategy
Growth strategies are never followed in a vacuum, and being willing to shift direction in response to market input is just as crucial as executing a strategy with zeal. According to McFarland, organizations often spend a year to formulate a plan, and by the time they’re ready to put it into action, the market has changed on them. That’s why, while developing a growth strategy, he recommends businesses to think in 90-second increments, a method he calls Rapid Enterprise Design. Taking it one rung at a time is sometimes the best strategy.