Firstly: is growing your business a good idea?
Contrary to what most people may believe, deciding to grow your business may not always be a good idea. Yes, the nature of most businesses is such that they constantly need to keep growing; else they may not be able to compete with other businesses in their industry. However, if you do not grow your business in the right manner and also at the right time, you could end up facing so many problems that you would rue the day you decided on business growth. There is no doubt that there can be immense benefits of growing a business, but it is also true that business growth may bring with it various disadvantages. Hence, before you decide to take the leap and expand your business, you need to look at all the pros and cons of business growth, so that you can take a knowledgeable decision.
Benefits of business growth
The primary reason why people want to grow their business is to take advantage of the benefits associated with business growth. These benefits are:
- Being able to bid for larger and better projects: Growing your business allows you to take on much bigger projects than you may have been able to in the past. If you are in the business of selling some product, then increasing your production capacity allows you to fulfil larger orders and take on bigger clients. Similarly, if you are in the business of providing a service, then increasing your man power enables you to bid for jobs that you previously could not hope to bid for. In fact, if you want to work with large clients, you may have to think about business growth because such clients rarely ever work with small businesses.
- Increased profits: This is undoubtedly one of the main reasons why people want to grow their businesses. By expanding your business and attracting larger clients, you can enhance your profits considerably. Yes, your business expenses too will increase significantly, but if you have gone into the expansion in the correct manner, then you should be able to turn a larger profit in spite of the increase in business expenses.
- Increasing your market penetration: It is possible to achieve greater market penetration by growing your business. With business growth, you can put your products or services in front of a larger target market and can thus increase the market penetration for your products. Business growth may even make it possible for you to enter new markets that you did not have access to previously.
Considerations before growing your business
Therefore, business growth can open up newer markets for your business and turn out to be extremely lucrative. However, before you decide to grow your business to take advantage of the above benefits, you need to understand some of the negatives associated with your decision. These are:
- Significant increase in business expenses: Business growth will require you to spend a considerable amount of money for expanding your business. You may need a new manufacturing plant or a new office, which are sizeable expenses and may require you to invest more money into the business. Apart from these expenses, you may also be looking at other expenses in terms of hiring new employees, training them and advertising your business in newer markets. Hence, before you decide to grow your business, you need to be absolutely certain that you can raise the money required for these additional expenses. If you go into the business expansion blindly and without considering what your return on investment will be, you could be making the worst mistake of your professional life.
- Difficulty in finding good employees: Another major problem that is associated with business growth is the difficulty in finding good people to help you with your business expansion. Once your business expands, it is unlikely that you will be able to manage the added workload on your own. Hence, if you do not have the right people to handle key tasks, you will not be able to expand your business in the right manner. Thus, before you decide to grow your business, you need to ensure that there is enough of a talent pool out there for you to pick your key people from.
- Business growth not in line with your long term goals: Many business owners take the decision to grow their business simply because they think it is time to grow, or because their competitors are expanding their businesses too. However, your decision to grow your business has to be in line with the long term objectives that you had set when you had started your business and should not be based on any other factor, such as trying to compete with others.
Therefore, before deciding to grow your business, you need to analyse these pros and cons and make a decision accordingly. Consider your long term goals from the expansion, know how much money you want to make in terms of profits and also be realistic about whether or not you can see the business expansion through. Only after you have considered all these factors should you think about growing your business.
Strategies you can adopt to grow your business
There are various strategies that can be used to grow a business. Regardless of what type of strategy you use to grow your business, there are certain risks that you will have to face. That being said, some ways of growing a business are considerably less risky than others. In this article, we focus on the top 4 ways to grow a business that range from low risk to high risk growth strategies.
How to grow a business
If you have decided that it is the right time to grow your business, then here are some ways in which you can achieve business growth:
- Increasing your market penetration: One of the easiest ways to grow a business is to enhance your market penetration. What this essentially means is that you are selling more of your current products or services within your existing markets and perhaps to a larger number of customers. Very often you may realise that your product or service is being received very well by your customers, but in spite of that you are not being able to capture as big a market share as you expected to. If that is the situation you are facing, there are various options you can use to try and increase your market penetration. These options are:
- Price your products or services more competitively: One of the reasons why your market penetration could be low is due to high pricing of your products or services. Hence, if you are looking to grow your business, you should try and reassess the price at which you sell your products, so as to make them more attractive to customers. Once you achieve greater market penetration through better pricing, the money that you lose out on by lowering your price could well be made up through larger volumes in sales. If you do not want to lower your selling price, you could offer discounts to customers on bulk purchases or offer them loyalty reward programs that makes them choose your products over another brand.
- Intensify your marketing and promotional activities: The only way people will buy a particular product or service is if they know about it. Many businesses lose out on their share of the market simply because they do not have the right marketing and distribution channels. Hence, if you want to grow your business through market penetration, you need to intensify your advertising campaigns and make sure that the buying public is aware about your products. Direct selling activities are also a great way to increase awareness about your products and services.
As far as increasing market penetration goes, this is a low risk strategy for growing a business.
- Offering new products to existing markets: This is a medium risk strategy for growing a business. You can either develop a new product to sell to your current markets, or acquire a new product or service that is related to the existing products that you sell. However, before you invest money into your business to manufacture a new product, you need to research your current market and determine an area of need that can be fulfilled by your new offering. You also need to determine what your customers are likely to pay for such a product and ensure that you can develop the product within those pricing points.
- Create new markets for your existing products: This is another strategy that can be used to grow a business. If you have achieved as much market penetration as you are likely to in your existing markets, it may be time for you to look at opening up newer markets for your business. A great way to do so is to go online. Having a web presence for your business not only helps to grow your business in your state or country, but can also help you to grow it globally. Similarly, you can hire overseas agents to sell your products and services to markets around the world, where your product is likely to fare well. Another option for growing your business in newer markets is to adopt a franchising module. By offering franchises of your products and services to other companies or individuals, your business can grow considerably in a short span of time.
- Entering new markets with completely new products: This business growth strategy comes with very high risks, but can also reward you handsomely if you manage to succeed at it. You can either develop a whole new product on your own, or partner with another company that sells related products in newer markets. However, before you decide to adopt this strategy for business growth, make sure you have a thorough understanding of the new markets that you wish to enter and know exactly how they function. Not only do you need to understand your new target customers and their purchasing behaviours, but you also need to analyse the competition to know whether your business growth will be a success or not.