How to grow your business
Every business owner and entrepreneur must consider the growth of their business. After all, who wouldn’t want to increase profit through expansion or decrease product cost by building scale? Business growth is necessary to create brand longevity.
As business growth involves so many moving pieces, it can become overwhelming rather quickly. From creating the sales funnel to building customer loyalty, growth strategy must be considered at every stage and at the departmental level of your business functions. Though capital investment is a necessity, growth additionally requires investments in human resources and technology.
In this article, we’ll cover what you can do to effectively grow and scale your business to accommodate more customers and lead a competitive industry.
One important note: technically speaking, growth and scale are two different concepts even though they are used interchangeably. While growth involves adding operating costs at the same rate as revenue, scaling means incrementing operating costs compared to a steady growth in revenue. Though both of the terms growth and scale are used in this blog, we will specifically refer to the definition of scaling.
How to know if your business is scalable
Before you can effectively grow your business, you first must initially assess whether the opportunity for growth exists. Amateur business owners often make the mistake of rushing to add new employees, install new storefronts, or release new products before even solidifying a reliable stream of revenue.
You don’t need fancy software or specialists to figure out your scalability. All you need to know is your business’s operating leverage. Here’s how:
First, calculate your operating cost growth. These are the costs associated with running your business. This would include marketing, research and development, software licenses, office rent and utilities, and so on. Then, comparing to the previous year’s operating costs, calculate the change in operating costs from year to year (new-old). Finally, calculate your total revenue growth.
If your operating costs are growing at the same rate as your revenue, your business cannot scale. If your revenue is growing at a significantly higher rate than your operating costs, then your business should scale up. It’s as simple as that!
Don’t be disheartened if your business isn’t immediately scalable. Many businesses (restaurants, for example) struggle to scale within the first few years, but this is not a measure of success (or lack of). Sometimes other questions are more pertinent during earlier stages of growth. For example, does the product have market potential? Or, can your business run without you? Scalability will come naturally as your business becomes more autonomous.
Operating a home business? Check out our other post on five ways you can grow a business beyond your living room or apartment.
How to do a competitive analysis
Understanding the competitive landscape is paramount to scaling your business. It’s always a good idea to learn about the brands you’re up against so you can better understand how to position your own brand in the minds of consumers. To begin analyzing the market place:
- Compile a list of your competitors. Pick companies from within your space with similar offerings. Analysis should not be limited to your current competitors. It should additionally factor in aspirational competitors- the competitors you wish to compete with (the Amazon and Google of your industry).
- Review your competitors’ branding. And not just the colors or fonts they use. Focus on their company mission, value proposition, and brand promise. What differentiates them from other brands? What are their strengths and weaknesses? What are the similarities and differences among you and your competitors? The more time and depth you spend on your analysis, the better you can understand the competitive landscape.
- Position yourself on a perceptual map. Draw a cartesian plane, a chart with an x axis and y axis that divides the page into four spaces. Then choose two attributes, such as cost, quality, originality, convenience, or reputation, to put on each axis. For example, you may choose to compare brands on cost and quality. The x axis can measure quality, with the left side indicating low quality, and the right side indicating high quality. The y axis will measure cost, with the lower half indicating low cost and the top half indicating high cost. You would then place each competitor on the perceptual map depending on how you (or the people you survey) perceive those brands. Look at the following chart from Column Five, a creative content marketing agency, for more information:
- Position your brand. Ultimately, your goal is to find a space that isn’t cluttered with competitors, and this should give you a better idea of how your brand should scale. In the example above, the quadrant with low cost and high quality is empty. This suggests that the space in which a company can create high quality products at a lower cost will be less competitive.
Business networking and partnerships
Scaling up requires cultivation and establishment of the right networks and partnerships. As the saying goes, who you know can be more important than what you know. Benefits of networking include:
- Staying current on industry developments. No matter the industry, change is inevitable and the marketplace will constantly shift. New trends and products can emerge. Long-standing titans can become antiquated, to be replaced by fast-growing startups. If you don’t stay up to date, how can you expect your business to do the same?
- Finding partnerships. Finding the right partnerships and collaborating with other companies is key to discovering business opportunities. Start by finding networking events within your area. You never know— you may run into a more cost-effective supplier, a potential customer, or a marketer looking for more work.
- Problem-solving. Networking is more than just building your list of contacts. It’s about growing your knowledge base. Companies that are just starting out aren’t just lacking in resources, they’re lacking in experience. By meeting more seasoned professionals and companies, your company can learn how to approach the common problems of scaling, such as driving operating costs down or finding niche audiences.
For more mature businesses, diversification is the ideal play to maintain longevity. But it’s also the riskiest strategy, according to the Igor Ansoff Product/Market matrix:
– Market Penetration (present market and present products) – When a company successfully sells a specific product to a specific market
– Market Development (new market and present products) – When a company offers one of its existing products to a new market
– Product Development (present market and new products) – When a company brings a new product to one of its existing markets
– Diversification (new market and new products) – When a company creates a new product for a new market
Despite the major risk and uncertainty involved with diversification, it is also potentially the most rewarding. There are three types of diversification strategies worth considering:
Concentric diversification: Some businesses will want to enter an industry where they may leverage their technical experience. For example, Apple’s introduction of the first Apple Watch. Though Apple did not have experience in the wearable technology market, they were able to use their knowledge building smartphones and computers to create and excel in an entirely new market space.
Horizontal diversification: Companies can also add new products that complement their existing product line and appeal to current customers. Although Ikea is mostly focused on furniture, they will also sell smaller items such as pillows, covers, and decorations.
Conglomerate diversification (also known as lateral diversification): Finally, companies may add new products or services that have no technological or commercial similarities to their current offerings. This is what Evernote (the online note-taking app) did when it began selling physical notebooks that also allowed you to easily photograph and store those notes in their app.
It can be difficult to determine whether your company should diversify or focus on its’ existing processes. It’s important for every company to weigh the pros and cons of diversifying. Remember— this is a strategy reserved for more mature and experienced companies looking to scale even further, and would be far too risky for early startups.
Developing a growth framework
You may be wondering, what is a growth framework and why is it important? With countless marketing tools, strategies, tactics to keep track off, a framework helps condense all those concepts into a single, easy-to-follow system.
But how does one develop a growth framework? There are quite a few methods, rather than a “one-size-fits-all” approach that can be applied. Instead of prescribing a single process for every business to follow, we thought it may be more helpful to share an existing framework used in many businesses today— the traction bullseye framework.
The Traction Bullseye Framework
This particular framework features a simple five-step process:
- Brainstorm – The framework suggests there are 19 different channels a business can use to generate traction, ranging from trade shows to content marketing. The first step is to determine the benefit of each channel to your business. It’s important to consider each alternative carefully. You may want to use a spreadsheet or similar document to help you stay organized. Ask yourself— how much will this channel cost to maintain? How many customers can we draw through that channel? What experiments can we run to gauge success?
- Rank – Next, categorize each of the channels into three ranks: 1) Inner Circle, 2) Potential, and 3) Long-shot (hence the bullseye metaphor). The first rank includes channels that seem most promising and worth pursuing. The second rank includes channels that may possibly work. Finally, Long-shot includes channels that are not guaranteed to provide value.
- Prioritize – Now comes the time to start assigning value to each of the channels in the Inner Circle. Choose the three most important channels to focus on. While other channels may be important, you’ll want to allocate resources towards the top three revenue or growth producing channels.
- Test – Your ideas are still only assumptions until you can measure success. Go back to those same questions you asked yourself during the brainstorming phase— such as how much each channel will cost, and how many customers can be attracted through each channel. Just as each business is different, each channel experiment will change depending on the company. The goal is not to generate traction with a channel, but to measure success.
- Focus – Hopefully your experiments yield some useful insights (and if not, you will need to repeat the process until you find another promising channel worth testing). Once you find a channel that appears to increase customer acquisition, then you need to focus your business’s resources on that channel. It may be appealing to then improve other channels until they become successful, but you’ll get more mileage from focusing on just one channel.
The traction bullseye framework is one of the most popular frameworks for measuring growth, but by no means the only one. Many businesses have also chosen to create their own framework that effectively measure their success. Choose a framework not based on what other businesses use, but what your own company will use.
Growing a business can seem like a major undertaking, and understandably, many entrepreneurs are at a loss for where to start. But with in-depth research, the right network, and a solid framework to organize your process, your growth strategy should become less daunting.
At Novel Coworking, we’ve witnessed business growth first hand. Many startups in our spaces began with one or two workers before turning into major enterprises with hundreds of employees. With the right planning and leadership, your company may be the next success story.
Managing your talent is key to scaling effectively. Check out our previous post on strategies for talent management.
For businesses to scale, your team needs to be on the same page. We recommend using the SMART method to help your employees set realistic and impactful goals. Visit the link for more info.
Scaling your business is important to learn about Growth Hacking.