Expanding your business can bring many benefits. It is key to have a well-thought-out strategy that aligns with your goals, market, resources and customers.
With this in place, you can achieve your ambitions and successfully scale up.
The first step in your strategy is choosing a growth model that fulfils your requirements, makes logistical and financial sense and has a long-lasting impact.
We have listed seven of the most common growth models for businesses, including how to implement each and the results you might expect.
- Market penetration
- Expand product portfolio
- Expand audience through location
- Expand audience through awareness
- Diversification
- Acquisition
- Merger
Market penetration
A market penetration growth model focuses on new products or services entering your existing markets.
The aim is to increase your market share in any given market. To do this, you need to fill a gap, provide better service and quality, update or change your product, improve your marketing or change your pricing. By doing so, you will gain market share.
It’s also worth noting that you will face others trying to grow by market penetration. You must constantly adapt to the competition and demand to stay at the top.
Expand product portfolio
Another popular growth model is to add to your product portfolio. By adding new products or services, you expand your offering, which will attract more customers and give you an edge over your competitors.
The additional benefit of adding more products is that it increases the size of the orders from customers and repeat sales from existing customers. Both will substantially drive your revenue while maximising the value you receive per customer.
It’s crucial to identify goods or services that you can offer without overwhelming your operational teams, such as those that use similar materials to your existing products or that you can create cost-effectively. This will enable you to push profitability that fuels further growth.
Expand your audience through location
The key to expanding a business is acquiring more customers. There are a few ways to do this, one of which is making yourself available in more locations.
This model works best for businesses with a physical presence, such as those operating from stores, restaurants and factories with a specific geography that they serve. By launching operations in new locations, you will start to build a customer base there, which will grow your overall sales. The more places you add, the more your customer base should increase.
It is essential to be strategic by opening sites in the right place where you know you can attract demand. This allows you to access sales and profit to warrant the added operational costs and fuel profitability.
If you haven’t already, it’s worth building an online presence for your business, such as through an e-commerce platform. This reduces any limitations on geography, allowing you to access customers all over the country (or even the world) for massive sales potential.
Expand audience through awareness
Another way to target more customers is to improve awareness of your business. Once more people know who you are, they will be more inclined to learn more about your business. This will lead them to become customers.
There are several ways to improve awareness. The main one is utilising marketing, enabling you to expand your reach, tap into new markets and audiences and build a favourable reputation.
Another option is to work with partners who will expose you to their audience, provided your business offers something in return – such as commission, service or support.
Finally, it’s worth focusing on the experiences you offer to customers. By exceeding their expectations through a quality product and outstanding customer service, your customers are far more likely to recommend you to others. This word-of-mouth marketing has a real impact.
Diversification
Diversification is a sound method for growth. It’s ideal for those facing limited room for expansion in their current market (due to the market already being highly saturated or a narrow customer base available).
When you diversify, you identify new audiences to which you can bring your offering. It could include finding new niches to fill with your existing products, or it could come in combination with the expansion of your product/service portfolio.
Planning is required to find the right markets to bring your business to. You ideally want one that can be targeted without too much additional work or cost to your original value proposition and where there is room for growth.
The benefit of diversification is that it protects revenue. If one market experiences a decline, you will hopefully still be able to generate income from the other, preventing any significant risk to your profit levels. However, you will need a deep understanding of the new market to ensure you can target it effectively for maximum results.
Acquisition
The models we have listed so far are associated with organic growth – growth that happens using internal resources and processes. The alternative to this is inorganic or external growth.
One of the most popular forms of external growth is acquisition, where you buy an established business. You gain that business’s assets, staff, and customers when you do this. This will automatically give you more resources and demand to fuel expansion.
If you choose to acquire a business, you need to make sure you find a fit for your values and goals. Doing so enables a smooth transition as staff and customers adjust to the new situation and minimise any disruption that could threaten performance.
You will also need to be in a solid financial position to cover the purchase of another business while maintaining cash flow across your operations. Fortunately, there are a plethora of funding solutions available to support this.
Merger
An alternative to an acquisition is a merger, where you combine your business with another. There is dilution of shareholdings but this will be in relation to the respective company valuations.
By joining forces, you are able to scale operations, increase your sales ledger and bring together resources for improved cost-efficiency and economies of scale.
As with an acquisition, you need to ensure a culture match between companies. This will also affect leadership as you will need to work together to guide any adjustments and succeed.
However, if done effectively, it can be a great way to expand your business.
Conclusion
Growth is something most owners want for their business. However, it doesn’t happen overnight. You need a blueprint that shows how you will grow, when and why it makes sense for your business.
Choosing a growth model is an excellent start in your journey, allowing you to determine the strategy you will implement to achieve your goals. This should enable you to understand the resources and support you might need to get there.
By considering your model for expansion first, you’re more likely to scale efficiently with long-term results and profit. It also makes the process feel much smoother and gives you the confidence to take the plunge.
Regardless of the growth model you pursue, you will need funding. We can help you secure financial support for your expansion.