Growth is a function of a business lifecycle that is ever-present irrespective of its size. This is because growth represents an increase in market share, a business expansion and ultimately an increase in profit. These are some of the core activities of a business.
Many entrepreneurs are so caught up in the day-to-day activity of a business and how to make more profit that they fail to realise the need for a growth strategy. Most do not even have a growth plan, which is one of the reasons their businesses fail within the initial two to three years of operation.
What then is a growth strategy?
A growth strategy refers to the plans and/or methods that a business adopts to handle present and future challenges while achieving its goals for expansion.
The process of creating a growth strategy is not rocket science but might seem complex, which is why most businesses skip it. It is important to note that a growth strategy is quite different from a business or marketing plan/strategy, which consists of the overall plan for your execution of an idea. A growth strategy operates more as a road map that shows the pathway for future growth.
What is the right time to develop a growth strategy?
There isn’t a fixed time for developing a growth strategy. However, a growth strategy is usually considered after an idea has successfully turned into a business.
This involves activities such as horizon scanning, establishing a niche, drawing up a business plan, and securing appropriate funding. Once your business has attained a level where it is profitable, it is now time to plan what direction to take for the business to grow.
There are many growth strategies available to a business depending on the reason for embarking on a growth journey, but let’s focus here on the most common growth strategies:
Market penetration - this happens when Company A decides to sell more of its products or services within an existing market with the sole intent of increasing its market share in the industry. This strategy has the least risks involved, which means that start-ups can adopt this strategy.
Market development - adopting this strategy means that the business will focus on introducing new products/services to an existing market. Unlike market penetration, the business will sell new products to new and existing customers. For instance, Company A selling clothing items for females can decide to adopt a market development strategy by adding accessories and male wears to their offerings. This requires market research to determine attractive products. Furthermore, Company A can decide to think of new ways customers will use their existing products and services. There some elements of uncertainty and risks involved in this strategy.
Product development - some businesses try to develop new products or modify an existing product to create a new market. Our article on product development sheds more light on things to consider when adopting a product development strategy.
Diversification: This strategy is considered high risk and involves exploring and entering new markets different from the industry your business operates under. Diversification may be considered at some point in time in a business. However, proper planning and assessment are necessary beforehand to establish the advantages and disadvantages of diversification.
Although these strategies can be adopted independently depending on the type of business and its products, they can be combined with other strategies to yield better results and gain a competitive edge.
The process involved in creating an effective growth strategy is not usually performed in a vacuum as it involves key stakeholders who clearly understand the reasons for drafting a strategy, the expected impact it would have on the businesses, and key metrics involved in executing the strategy.
In summary, growing a business is fundamental to its survival, it also entails exploring several opportunities through research, planning, implementation of strategies.
A business with well-defined operations and growth plans is more likely to survive its first two years.
If you are considering developing a growth strategy for your business, we at the OVAC Group can support you. Email us for a consultation at firstname.lastname@example.org