What is Business Growth?
Defining business growth is challenging with many professionals disagreeing on an official description. One commonly utilized definition of business growth is as the bottom line profitability and market share presence increase a company experiences.
An alternative definition of business growth is the expansion of a company occurring in one or multiple ways. From a marketing strategy to business model updates there are virtually endless opportunities for a business to grow.
A crucial consideration for whether something occurring in a business can be defined as business growth is if that occurrence can be measured. If something can not be measured, it is difficult, if not impossible, to determine that it is growing.
Growing business sales and success is a primary motivator of many people that start a company. However, while the large majority do, not every company considers sales and business success as their top priority.
Some businesses want to make sure that their employees or customers stay their top priority. For these companies, growth strategies might focus more on both the overall customer and employee experience.
To encourage growth business strategies, plans, and objectives should be in alignment and complementary to one another. In fact, a business growth strategy should be considered throughout everything ranging from the initial business plan development to product line improvements.
Tip-: Business growth should not only be a top priority for a small business or a new business but instead for every company.
Growth vs Growth-Driven Business
Identifying the source of business growth or measuring growth strategy effectiveness can be challenging. For many professionals, it is helpful to analyze the differences between growth-driven businesses and growing businesses.
While a growing business is primarily focused on fast results, a growth-driven business is focused on a long term, sustainable business growth. 5 crucial considerations for better understanding the difference between growth vs growth-driven businesses include-
1. Marketing and Sales Relationship
The relationship between sales and marketing departments can be tense and full of misunderstandings, this incompatibility between departments may result in major growth issues for the entire organization. A growth business makes a concrete effort to challenge any misconceptions that these departments may hold towards each other.
A common misconception that marketing department personnel hold regarding the sales department is that sales representatives do not understand the persuasive power of marketing materials. On the other hand, 80% of full time sales professionals express that marketing professionals do not understand real world sales strategies.
Compatibility between marketing strategy and sales strategy is essential for developing and maintaining business growth strategies long term. Companies should make sure that the two departments have growth goals to work towards accomplishing together.
Fact-: With the use of metrics every business has the potential to see how their marketing strategy and sales strategy align.
2. Customer Journey
Every business understands that an established customer base is crucial for long term business success and profitability. There is a significant difference between a growing business and a growth-driven business in regards to customer base priorities.
A growing business is primarily focused on obtaining new clients and new markets rapidly. Alternatively, a growth-driven business is focused on long term customer base retention.
The growth goals based focus of a growth-driven business leads to the retention of new customers long term. Alternatively, a growing business may boast high numbers of new customers temporarily but then fail to retain those new customers long term.
Growth-driven companies are purposeful in every step of the customer journey, from initial awareness to the brand ambassador stage. These growth-driven companies understand that business success is highly dependent on long term customer retention.
3. Brand Development
For both small businesses and large corporations, a clear indicator of a growth-driven business is the compatibility between the brand and customer experience. The established brand and business reputation should always be reflected in a company's customer service capacities.
Defining a brand requires a comprehensive understanding of both the business model and growth goals that the company holds. In fact, a company's unique brand should be considered in everything from its customer service interactions to its social media presence.
4. Market Focus
A growing business and growth-driven business have different focuses when it comes to new customers and new markets. A growing business may appear unrelenting in its drive to acquire new customers, the focus and motivation of these efforts are for profit generation, not for customer experience.
A growth-driven company is passionate about customer service for both new customers and long term clients. Growth driven corporations make sure to understand any new market before entry, even anticipating market changes before they occur.
For a growth-driven company, business success often looks like making sure that customers are provided with not only a product line that is great but universally excellent customer service every step of the way.
5. Technological Investments
A growth-driven company has an exceptional business strategy and long term business planning in place in regards to technological advancements. Instead of waiting for a crisis to make changes, growth-driven companies are well prepared for any changes that the future may bring.
A growing business may not accomplish this same proactive technological investment due to a lack of capital or pursuit of a growth goal that is skewed. For instance, hyperfocus on a sales or marketing strategy by a growing small business or new business could result in insufficient capital available to address an oncoming market crisis.
Note-: In order for a company to grow successfully and sustainably, business strategy and business planning should remain a top priority.
The Importance of Business Growth
Every business should understand the importance of growth for business success and profitability. There are many additional reasons why growth is important for businesses that all professionals should be aware of.
Potentially the most widely recognized reason that growth is important is the increase in profitability that companies experience as a result. Increased profitability gained through making more sales supplies a company with additional resources.
Another prominent reason that growth is important is that it provides the ability to onboard more employees. Maintaining the correct amount of employees on staff assists with everything from customer service capabilities to product line improvements.
Additionally, employee retention rates can rise during times of growth, especially when growth goals and employee goals align. With more employees on staff, growth goals can be added to and new opportunities can be explored.
Growth can allow a business to take advantage of new opportunities that may not have been attainable otherwise. For example, a small business may successfully enter a new market with the extra capital and human resources it obtained during business growth.
A product line or services offered by a company may be expanded as a direct result of business growth. Not only do product line and service expansions help business profits increase, but they can also provide a competitive edge.
When a company has secured a competitive edge it is much easier to obtain larger market shares. With an increased market share percentage, continuous customer base expansion is likely, if not guaranteed.
Gaining and maintaining a competitive edge depends on continuous innovation. As such, both small businesses and large corporations should make sure to look for growth opportunities consistently.
The development of a solid brand and reputation for great customer service will attract even more new customers over time. Then, the compatibility between brand reputation and customer service experiences will increase the likelihood of a company retaining new customers long term.
4 Types of Business Growth
Beyond classifying a corporation as a growth-driven business or growing business, companies additionally experience growth in 4 different ways. The 4 primary types of growth a business can experience include strategic, internal, organic, and lastly- partnership, acquisition, or merger growth.
Learning more about each of these 4 types of growth can help business strategy efforts be more successful and organized.
Organic growth is generally considered the easiest method for business growth. Thankfully, it is also widely recognized as the most effective method.
Organic growth consists of visible and tangible company growth ranging from new products produced to a new business storefront opening. As more products or services are offered and sales increase, organic growth often necessitates more physical space to serve customers.
For a new business or small businesses entering a new market without sufficient inventory, organic growth is a great strategy choice. However, it should be noted that an organic growth strategy is not sustainable in the long term.
Review-: Although widely recognized as the easiest and most effective growth strategy available, organic growth strategies are not sustainable long term.
Unlike organic growth, strategic growth has a more long term focus. A strategic growth method is a great option upon the completion of the organic growth stage.
One reason that it is crucial to finish the organic growth stage before entering the strategic growth stage is due to the resources needed. Ideally, the organic growth stage will have produced a sufficient amount of capital for a company to invest in growth goals that are long term.
Business planning initiatives should always make sure to take strategic growth into consideration. Strategic growth strategy examples range from releasing new products for a product line to marketing strategy updates targetting a specific new market audience.
The main objective of internal growth is to utilize and optimize available resources. For this reason, internal growth varies significantly from strategic and organic growth as it does not look outward to production.
Internal growth is often utilized between an organic and strategic strategy due to its ability to optimize resource usage without necessitating a large financial investment. Instead of investing into expanded production and business developments, internal growth aims to use resources more purposefully.
Examples of internal growth may include a leaner business strategy or business model changes for resource optimization. Although internal growth may initially appear intimidating to team members, it is well worth the effort to accomplish optimal usage of available resources.
4. Partnership, Acquisition, or Merger
Many corporations may opt for a merger, acquisition, or partnership as a growth strategy. Partnership, merger, or acquisition is generally considered the riskiest growth strategy type but also the strategy with the highest potential for reward.
This strategy can facilitate an easier entry into a new market while also expanding an existing customer base. Additionally, expanded production capabilities can make the creation and introduction of new products go much more smoothly.
Another notable benefit of executing an acquisition, partnership, or merger is the potential to help business innovation and increase the likelihood of business success through collaborative efforts.
4 Main Strategies for Business Growth
There are 4 main growth strategies that every business should consider implementing. These strategies include product development, market development, diversification, and market penetration.
Properly using these growth strategies can result in long term business success and increased profitability. The 4 strategies consist of the following types-
1. Product Development
During product development, new products are created for a preexisting market. A significant benefit of the product development growth strategy is that existing clients can be utilized instead of a need for new market establishment.
An example of product development could be a toy product line expanding to include card games.
2. Market Development
Contrary to product development, market development introduces a service or product to new markets. Market development can be geographically based or based on a new market target.
An example of market development could be a toy company opening a new business location in another country.
Diversification occurs when a brand new product is introduced to a new market. The diversification growth strategy carries a high risk, but also the potential for a high reward.
An example of diversification could be a toy company creating machinery parts to sell directly to industrial clients.
4. Market Penetration
The objective of market penetration is to increase market share utilizing products or services that already exist. Methods of market penetration range from price discounts to increasing marketing strategy investments.
An example of market penetration could be a toy company lowering the price of their best selling product.
How to Write a Business Growth Plan
Business growth plans are short term roadmaps that companies create in order to project business success in the immediate upcoming years. A business growth plan should incorporate both business strategies and models.
The ending of each quarter is a great opportunity for companies to evaluate which growth goals were accomplished and which still need attention. Growth plans are often crafted with the understanding that they will be provided to investors and therefore are highly focal on revenue.
Many professionals have noted that writing a growth plan is similar to business plan composition. Information provided in the growth plan should include-
1. Expansion and growth opportunities
2. Fiscal growth goals
3. Marketing strategy specifics
4. Fiscal strategy outline
5. Employee scheduling requirements
- Business growth is crucial for bottom line profitability and business success.
- There are important differences between business growth and growth-driven businesses that every business should be aware of.
- 4 types of business growth include organic, strategic, internal, and lastly- acquisition, merger, or partnership.
- 4 strategies include product development, market development, diversification, and market penetration.