Once your business is established and is generating cashflow, it’s important to have a plan in place to create and manage growth. Ideally, you will have structured your business and crafted your business Read more
Once your business is established and is generating cashflow, it’s important to have a plan in place to create and manage growth. Ideally, you will have structured your business and crafted your business processes to make them easily scalable, but if not you will need to explore the most efficient and safe ways to effectively expand your operations. Growth necessarily has two elements; growth in business done and scaling the infrastructure to service that business. In a service business, this will likely mean attracting more clients and adding the necessary staff to deliver your services and manage business operations. In a product business, it will mean making more sales and handling the increased complexity and cost of the logistics to source and distribute them.
How to stimulate growth
Scaling a business without increasing demand is useless and dangerous. It increases the operational costs and overheads, without simultaneously growing the revenue stream. Therefore the first step in expanding a business is to stimulate growth by acquiring new customers and increasing income. These practices fall into two main areas - sales & marketing and business development.
On the sales & marketing side, businesses are looking to attract new customers and clients. This can be done in many different ways, and businesses should be utilising market research to build a marketing strategy that works for them and their key demographics. Further to this, the sales funnel and sales processes should be constantly reviewed and refined to ensure that the highest possible percentage of leads (generated by marketing) are converted to sales. Companies will likely utilise a mix of advertising (both traditional and digital), public relations and direct marketing techniques to generate new leads, so investing greater resources in these avenues will lead to growth - as long as the marketing strategy is effective and the sales funnel has been well constructed.
On the business development side, businesses are looking to eliminate waste and lower their expenses (thereby raising their profits), and adding new income streams. New income streams may come from the development of new products and services, the undertaking of new partnerships or the acquisition of new productive assets.
How to handle growth
As far as problems go, a growing business is one of the best ones to have. A growing business is one which is experiencing demand which goes beyond its current capacity to deliver, and which increases its capacity to meet the new demand. It should be noted that this is not the only way to handle excess demand. Some businesses, especially consultancies and other business services, choose instead to raise their fees and become more selective about projects, allowing them to increase their earning and reputation without exposing themselves to higher overheads. Similarly, a company offering a new product who cannot meet excess demand may raise the product price, introduce a waiting list or offer limited special runs, depending on the type of product.
In most cases however, the best way for a business to generate higher profits is for that business to scale with demand. The specific way this is done will differ depending on what it is the business delivers, but it may include investing in increased production facilities or equipment, hiring new staff, developing better customer service tools, upgrading business systems, streamlining existing business processes and simply working longer hours. When the growth is likely to be sustained growth, it is wise for the business to have a scaling plan which allows production capacity to be increased sequentially using a well-defined process, to avoid business disruption and to minimise risk.