You’ve survived the startup stage. What’s next?
If you’re reading this, you’re a survivor. You’re among the 50 percent of American businesses that didn’t fail within their first five years. Just getting past Year One is a major accomplishment. According to the U.S. Small Business Administration, more than 20 percent of new businesses expire within the first 12 months.
But now you have a new challenge. Your sales have plateaued, and you aren’t sure how your company can continue to grow.
Classic management science defines four strategies for growth:
- Additional sales in your current market
- New markets for your products or services
- New products or services in your current market
- A combination of new products and new markets
Each of these options comes with its own risks and rewards. Regardless of the strategy, you can mitigate the risks—and enjoy richer rewards—if you never lose focus on your core business.
Additional Sales in Current Markets
Before you pursue new opportunities, start by refocusing on your core business. Make sure you have chased out all inefficiencies, tweaked your product or service offering, and maximized the sales available in your current market. This will ensure your existing business has the best chance of continued success as you pursue growth in other areas. Failing this, you risk losing what you’ve already built.
There are several tactics for growing sales in your current markets. Aggressive promotion and pricing could encourage current customers to buy more and new customers to give you a try. These new customers are either currently buying from your competition or haven’t previously been in the market.
Acquiring a competitor’s business is another good way to grow your customer base and knock out the competition.
New Markets for Existing Products
Looking to move beyond your core business? In all likelihood, your best, lowest- risk option is to find new markets for your existing products and services. You have proven your product, and you understand your customers’ preferences and why they value your product. Expanding into other markets simply means finding new customers with similar wants and needs.
Expansion into new geographies is often a good option. If you’ve satisfied customers in your current area, it isn’t a stretch to think that you can capture a market in another location. The export market is particularly fertile ground, as 95 percent of the world’s consumers live outside the United States.
If delivery of your product or service over long distances isn’t practical, franchising your business model could be a solution.
New Products for Existing Markets
Developing new products can be risky, but you can improve your odds through thoughtful planning and leveraging your expertise in your current market. Look for ways to increase your product line without straying too far from your core business.
Extend your current product line by adding or eliminating features to increase your audience of potential customers. A step-up strategy—that is, offering a lineup of offerings with good, better and best levels of value and service—is one way to bring in additional customers who are willing and able to purchase at different price points.
Bundling your product with complementary products or services can also enhance the value you bring to your market. One way to do this is to offer support services for your product—for example, an installation service to go along with the purchase of a home theater system. The price of the bundle is typically less than the price of the individual items, making it a good deal for your customers.
Another (relatively) low-risk approach is to create a new product or service that would appeal to your current customers. If you are a successful nursery that sells a wide variety of plants, it is not hard to imagine that you could sell pots, potting soil and landscape design services.
New Products in New Markets
This strategy has the highest level of risk. It requires new knowledge, new processes and many unknowns. Careful consideration of risks and rewards should be followed by detailed planning and execution.
Smart business owners seek out help when they pursue this strategy—often via a business resource organization like the SBA-sponsored Small Business Development Centers (SBDCs).
Your local SBDC provides free, one-on-one counseling to help clients develop growth strategies and plan their execution. That includes conducting a feasibility analysis to verify assumptions and ensure the idea makes sense. The SBDCs can provide demographic and economic data that would normally be out of reach of most small businesses.
You may find other specialized help at your nearest SBDC. The Kansas SBDC at Johnson County Community College, for example, offers low-cost programs like GAME (Growth through Action, Measurement and Engagement), a course that shows business owners how to set and pursue a growth agenda; the Strategic Management Program, a service that provides customized strategic plans, quarterly reviews and ongoing mentoring; and Riddle of the Exporter, which demystifies the exporting process.
Pursuing additional growth in your small business will bring new challenges, extra work and—with any luck—higher revenues. You can do it. You’re a survivor.