Whether you’ve just launched your small business, are piloting a new startup, or your company has been active for years, you probably spend a lot of time thinking about growth. And if you don’t have a concrete growth strategy – a plan for how your company will penetrate new markets, grow revenue, expand your customer base, and optimize your internal resources – you should realize that growth isn’t going to manifest on its own.
- Types of Business Growth Strategies
- Internal Growth Strategies
- External Growth Strategies
- How Do You Develop a Business Growth Strategy?
- How Can Your Articulate Your Business Growth Strategy?
- Common Challenges facing Business growth Strategies
- Staying Ahead of Competitors and the Market
- Planning for Unforeseen Events
- Integrating the Right Systems and Technologies
- Hiring the Right People
- Clearly Documenting Your Business Growth Strategy
- Effective Business Growth Strategies
- What are Successful Functional Level Strategies for a Growing Business?
- Choosing the Right Strategies to Grow Your Business
- Sustainable Business Growth
Research suggests that only one-tenth of one percent of companies will ever reach $250 million in annual revenue. While that’s a lot of money for an individual, $250 million in annual revenue still only represents a mid-sized business by many standards.
The problem for businesses these days is that everyone has a different idea of what a growth strategy entails. Some people really mean “marketing strategy” when they say, “growth strategy.” Others are only referring to big business strategy concepts like acquisitions and mergers.
One of the most common growth concepts is that of “the four major growth strategies,” which are:
- Market penetration
- Product development
- Market development
This is also known as the “Ansoff Matrix,” developed by mathematician and business manager, Igor Ansoff:
Each strategy relates to either building up your presence in an existing market (market penetration strategy and product development strategy) or entering a new market entirely, either with existing products or a new product (market development strategy and diversification strategy). These are relatively old concepts, but they still hold true today.
Lowering prices is still a great way to gain more market penetration, for example, and entering a new city or country with your existing products is still an ideal way to develop a new market.
That said, businesses have evolved to the point that “growth” can no longer pertain to market strategies alone. To maintain sustainable growth, internal change management is just as important. Your business growth strategy must include a roadmap for how you’ll scale your business and adapt to changing demands, new technologies, and yes, revenue growth.
Types of Business Growth Strategies
When thinking about growth strategies, it’s important to differentiate between the two most common ones. These are:
- Intensive growth strategies
- Integrative growth strategies
An easier way to categorize these two approaches to growth is to think of “intensive” strategies as “organic” growth strategies. That is, they help you strategize the growth of your company by using your own internal resources to optimize your business and tap into new markets.
“Integrative” growth refers to a company’s further integration with its own industry or market. It usually involves acquisitions, mergers, or gaining new suppliers.
For our purposes, we’re focusing mostly on intensive, or organic growth strategies. Within this category, you can break your strategy down even further. There are two types of organic growth strategies you should be aware of, which are:
- Internal growth strategies
- External growth strategies
While they are similar, there are some marked differences between the two. Understanding these differences is key to developing an overall growth strategy for your business.
Internal Growth Strategies
Internal growth occurs when your business expands its own operations through the development of your own internal resources. An internal growth strategy doesn’t typically rely on external resources, although it could include expanding your capabilities through the acquisition of new technologies or developing your knowledge base through better hiring practices and ongoing employee education.
Typically, internal growth strategies are based upon the following:
- Improving knowledge
- Expanding capabilities
- Evolving company culture
- Optimizing the company’s structure
- Hiring and expanding internal teams
Internal growth tends to be slow — much slower than, say, acquiring an entire other company and placing them under your brand’s umbrella by the time the market opens on Monday. But it also tends to be the most sustainable and risk-averse type of growth.
Certainly, developing a new product is not without its own level of risk, but it is less risky than spending millions to buy out a competitor at the risk of another one popping up in its place. Most companies engage in internal growth in one form or another, and in most cases, it is necessary to gain a competitive advantage in the marketplace.
External Growth Strategies
External growth strategies, in the organic sense, refer to any type of growth strategy that involves relying on resources outside of the organization. Forming strategic alliances with other companies, sourcing from new suppliers, or developing a new referral network could all fall under this category. If you partner with a consulting agency to optimize your marketing, for example, this could also be considered an external strategy.
Many of these strategies can help you accomplish some of the objectives mentioned above, but they also proved the added benefit of directly influencing your presence in the market.
Acquiring a competitor, buying a supplier, merging companies, or any other integrative strategies could also be considered external growth strategies. Although they may involve some serious internal changes, they still require you to focus your time and investments outside your company in order to grow it.
There are some benefits to the integrative approach, such as:
- Faster access to new markets
- Immediate market share
- Economies of scale (cost savings gained by increased production)
- Less competition
- New branding opportunities
This type of growth can sometimes be risky and disruptive, and it’s usually only available to companies that have enough working capital to do it. That said, it should still be on your list of options when developing a growth strategy.
*Fun fact… Ladder acquired a company – (a growth hacking agency known as Growth Engine) and it’s really helped us scale our growth marketing solutions to larger brands like Booking.com, TimeOut, Criteo, and more.
How Do You Develop a Business Growth Strategy?
Based on a survey of global business executives by management consulting firm McKinsey & Company, there are three strategies that matter most to organic growth, but 58% of executives can only identify one of them. Furthermore, they only tend to pursue one strategy at a time. These strategies include:
- Investing in existing products, services, and commercial activities that generated past growth
- Creating new products, services, or business models
- Performing better by constantly optimizing your core commercial capabilities (sales, pricing, and marketing)
Pursuing one of these strategies can lead to some organic growth, but it isn’t a formula for building the type of sustainable growth you’d typically associate with successful companies.
According to McKinsey & Company, “the executives reporting above-market growth at their companies—our ‘top-growth’ firms—are more likely than others to say they are pursuing a diversified approach to growth. Compared with the others, respondents at the top-growth companies also report much stronger capabilities in several areas, such as analytics and product development.”
As you can see, the three strategies McKinsey & Company recommends are a mix of both internal growth strategies (creating new products and services) and external growth strategies (optimizing sales and marketing tactics). Developing a growth strategy is simply a matter of identifying how each of these strategies applies to your business and how you can utilize them for growth.
For example, if one of your old products brings in a consistent percentage of your revenue each year, it makes sense to continue investing in that product — or even expanding your investment, as you can almost guarantee a high return for less risk. But you shouldn’t stop there.
Eventually, that product may not sell as well as it used to, so you must constantly be innovating to stay ahead of market demands and to grow your market share. This typically requires you to create new products and services based on the opportunities you see in the market or to enter new markets altogether.
And finally, you should always be improving and optimizing your core business capabilities. For service-based organizations, this may pertain to the customer experience as it relates to your customer service channels. For other companies, this may refer to your sales strategy, your digital advertising strategy, or even your company’s culture and hiring practices.
How Can You Articulate Your Business Growth Strategy?
In order to implement your growth strategy, you need to be able to articulate it internally. This means getting all your employees – including key decision-makers – onboard before executing.
You should do this in no vague terms. It may take several strategy sessions to fully hash out what your growth strategy entails, and every session should be documented so you can build upon it. Eventually, your growth strategy should be a concrete list of executables and timelines, taking the form of a growth plan. Your growth plan should include:
- A description of your opportunities
- A financial plan for implementing the growth plan
- A list of actions the organization must take by department
- Clear and measurable goals for every level of the organization
- A process for measuring the organization’s success toward major and minor goals (including ROI)
- A breakdown of staffing needs
- Contingency plans for unexpected occurrences
Your growth plan could be a simple as your marketing and product development strategy for entering a new market or as complex as a complete overhaul of your organization through digital transformation.
Common Challenges Facing Business Growth Strategies
Naturally, company growth is never without its hiccups. You shouldn’t expect your growth plan to be executed perfectly from the beginning, which is why you should include some wiggle room in your implementation schedule and include contingency plans for unforeseen consequences. After all, you never know what the market will throw at you, and what made sense one month might not make sense the next.
Challenges can come from the market, from internal stakeholders, and even from your human resources and staffing departments. Here are some common growth challenges you should be aware of.
Staying Ahead of Competitors and the Market
If you’re developing your own growth strategy, it’s safe to assume your competitors are doing the same.
When developing strategies for your own business, you should always remember that you aren’t operating in a vacuum. Keep tabs on what your competitors are doing and use that data to inform your own strategy. What can you do better? What differentiates you from them?
Most importantly, study your customers. Just because your competitors are performing well doesn’t mean you can offer those customers a better experience.
Planning for Unforeseen Events
Rarely does a business strategy go according to plan. The growth strategy you first develop may not be the one you follow through with. Expect this when implementing your strategy and leave some room for flexibility.
You can bake a certain amount of certainty into your strategy by looking at past models and extrapolating, but every new business strategy is still an experiment on a fundamental level. Design your strategy to accommodate these experiences.
For example, instead of saying, “we’re going to implement x, y, and z on these dates,” say “we’re going to implement x, measure the results, and these teams are going to use that data to inform their implementation of y.” There are still enough constants in this plan, but it’s data-driven and flexible.
Integrating the Right Systems and Technologies
Growth alone won’t mean much if you can’t sustain the size and scope of your business. While there’s plenty you can do externally to manage growth, you won’t be able to stay efficient if you don’t address your legacy systems.
It could be that you’ve already implemented scalable technologies, but as your market share and the size of your organization grows, any tools that are holding you back should be on the chopping block.
A few of the most integral technologies for businesses are:
- CRM systems
- HR management platforms
- Collaboration and communication tools
- Cloud storage solutions
- Project management software
- Data security suites
These technologies can be expensive, but they play a huge role in the success of your business growth.
Hiring the Right People
Hiring great talent is getting harder, and not just because of low unemployment.
In one survey, 74% of recruiters said they expected hiring to be harder in 2019. Low employment numbers played a role, but the fact that job hunters are more empowered than ever is also something that’s changing the way we work.
Let’s say you’re looking for a new job opportunity. With little to no effort, you already have a wealth of information at your fingertips.
Online reviews, salary estimates, and company culture information is just a click away. There are hundreds of locations to search for a new job online. It’s also reasonable to expect a hiring manager to interview you remotely or even to text with you to answer your questions about a position.
Furthermore, younger workers aren’t just looking for a steady paycheck and a decent health plan. According to HR experts, they want to work at a company that is future-oriented, has a great culture, and will help them grow professionally. As older generations continue to age out of the workforce, taking their experience and expertise with them, it will be up to you to develop a hiring process that avoids brain drain and helps you maintain your growth strategy.
Clearly Documenting Your Business Growth Strategy
One of the biggest challenges companies face when developing a business strategy is disseminating that strategy to the rest of the company. It can’t remain with key decision-makers. Otherwise, the rest of the team doesn’t understand what goals the organization is working toward and why.
Your growth strategy (or those parts of it you deem necessary to share) should be clearly documented and shared with the rest of the organization. You can accomplish this digitally through cloud-based management software or, if you’re small, by placing the necessary documentation where employees can see it.
*NOTE: Storytelling is important here, as well as using data to tell the story.
Effective Business Growth Strategies
An effective business growth strategy can come in a variety of forms. On the marketing side, it could be a new initiative to build brand awareness among a certain market or demographic. If you’re shooting for small business growth, building a presence on a new marketing channel or making a deal to sell a new suppliers product could count as a growth strategy.
One classic example of a successful growth strategy is DropBox’s “Viral Loops” strategy from 2008 and 2009. At the time, the concept of “the cloud” was still relatively new. Most people were still dependent on hard drives and USB storage devices to back up their files and data. The world was hesitant to embrace cloud storage because they were uncomfortable with the concept of storing their sensitives files on someone else’s computer.
To convince people to make the switch, Dropbox developed an ingenious idea: Let people try their product and give them a discount on it if they tell their friends about it. When the friend tries the new product, they get the same incentive, and so on and so forth.
By following this strategy, Dropbox reached 1 million registered users by April 2009, eventually reaching 500 million users as of March 2016.
What are Successful Functional Level Strategies for a Growing Business?
Functional level strategies are objectives that you assign to various departments to support the growth of your business. They tend to be specific actions that your teams and employees can take every day or overarching goals that specific departments are striving for.
A functional level strategy can be almost anything: a goal for ROI, a target for operational efficiency, or a strategy for reducing the amount of paper your company relies on. As long your functional level strategies align with the goals of your growth strategy, they are usually worth pursuing. That said, some strategies have proven to be more successful than others.
In the McKinsey & Company survey, respondents were asked about 44 different strategies that were in place at their companies. Based on responses from top-level growth companies, these are the capabilities that growing companies are excelling at:
Top growth companies are creating, performing, and investing in four particular strategies, which include developing their organizational culture, branding, resource allocation, and developing products and services. Notably, top-performing companies also emphasize the importance of building a better customer experience and believe they perform well at sales and pricing.
Few companies believe they are performing well with data and analytics, which mirrors other studies in this area — 72% of respondents in a study by business management consulting firm NewVantage Partners said they had not yet forged a data-driven company culture.
While developing a better organizational culture is clearly important for growth, these results don’t necessarily mean that data and analytics wouldn’t be important for your company. After all, every company is a data company these days, and it could be that shoring up your analytics capabilities may be just what you need to build your growth strategy.
Choosing the Right Strategies to Grow Your Business
Choosing the right strategy for your business depends on a number of factors, such as your industry, the needs of your potential customers, your market share, and your competitors. In most cases, you can start by developing strategies to bring in new leads and revenue (either in new markets or otherwise), then optimize your operations based on your requirements.
In addition to the functional level strategies mentioned in the McKinsey example, you may wish to engage in actions such as the following to encourage growth:
- Market research
- Funnel development
- New marketing channels
- Market segmentation
- Improved supplier management
- Organizational change (restructuring)
- Expanding your value proposition
This may require you to hire new talent, acquire new technology, work with a new third-party vendor, or even rent a new office. Whatever you choose, make sure it’s specific enough that it’s actionable. It’s easy enough to define “growth” in vague terms and hope your company achieves it, but it’s easier to grow if everyone knows that their objectives are each week.
Sustainable Business Growth
In most cases, organic growth is preferable over growth through acquisitions and other external strategies. Although it takes more time and effort to grow organically, focusing on your internal business operations is a much more sustainable method to grow than adding new business units through fast acquisitions.
According to one study of U.S. and European companies, those with more organic growth tended to outperform those with more growth through acquisitions:
Organic growth can be driven by expanded internal capabilities, such as new social media marketing initiatives, product developments, new sales and distribution methods, and improved customer relationships. As long as you can keep the scale of your business operations at pace with the scale of your growth, you’ll be able to sustain that momentum and focus on the next chapter of your business.