5 Business Growth Strategies for your company to increase profit

Unless you can say how much each effort is contributing to your company’s growth, you won’t be able to get the maximum out of them. You know, when Peter Drucker said that “What gets measured gets managed,” he may well have been talking about growth.

Breaking down your sources of growth.

business growth

Growing a successful business is easier said than done and companies of all sizes face a lot of challenges. Wondering how you can ensure that your business is sustainable? You need to develop a growth strategy for your company. If you don’t have a solid plan for growth, you are actually increasing the chance of losing your business to your competitors.

If you want to grow your company, you need determination, good business practices, and application of good business growth strategies. Keep in mind that an effective growth strategy is more than simply envisioning long-term success. You should figure out measurable steps in your growth and follow them.

Of course, small and medium-sized businesses vary greatly in their size and capacity for growth. They have different organizational structures and management styles but it is apparent that SMBs experience common business growing pains and problems at similar stages in their development.

Types of business growth strategies

Traditionally there have been four major business growth strategies. However, I expanded on the existing framework to include a few more. So, here are seven specific types of business growth strategies that you can use to fuel growth for your brand.

1. Market development (market penetration)

Market penetration strategy (or market development) is a business growth strategy in which you attempt to sell your existing products into untapped markets. This involves identifying new markets that would be a good fit for your current product line.

Market development is a common growth strategy because it allows you to move beyond your existing customers. As a result, you’ll expand your share of the market. This type of segmentation may involve targeting a new industry, new demographic, new corporate department (e.g., going from HR to finance), or new geographical location.

They started as a product accessible only to Harvard University students. From there, they expanded to include Stanford, Columbia, and Yale. Next they opened the platform to all Ivy League and a number of Boston-area schools. Then, they expanded access to colleges around the U.S. and Canada.

2. Market disruption

Market disruption involves coming into a well-established industry that is usually dominated by a few legacy brands and proceeding to do things completely differently than everyone else. There are a number of ways you can potentially disrupt a market, including:

3. Product expansion or diversification

Developing new products or adding new features to existing ones can be a highly effective business growth strategy. Product development opens your brand up to new audiences who weren’t interested in your brand before.

4. New channels

New distribution channels rank among the top 10 business strategies for growth because they propel revenue growth without any product changes. Ecommerce businesses like Allbirds have increased revenue by also growing their brick-and-mortar presence. Whereas Allbirds was exclusively online in the beginning, they currently boast 29 real-world stores.

Sometimes, one company’s identification of a new distribution channel can trigger a tsunami of change throughout the industry. Take Salesforce. They introduced the idea of cloud-based, subscription software in an industry dominated by large, expensive, complex enterprise software requiring an army of professional service reps to get it to work. Salesforce went on to grow rapidly, and today it’s a $21 billion+ entity. The software industry transformed, and today is completely filled with other SaaS offerings.

5. Strategic partnerships

Strategic partnerships with other brands can generate growth that otherwise wouldn’t be possible. For example, if you partner with a company that offers a product or service that complements yours, you get access to their audience, and vice-versa. You also receive referrals from your strategic partner and benefit from the goodwill built up around their brand.

An example of a strategic partnership that worked well is the one between Lyft and Taco Bell. Lyft offered Taco Bell delivery service to its customers, in which a Lyft passenger could request a mid-trip stop at a local Taco Bell (“Taco Mode”) with a simple tap within the Lyft app. The partnership led to free publicity for both companies and an increase in sales for Taco Bell.

Strategic partnerships can also focus on an improved or unique product. Once again, looking at Taco Bell, a partnership with Doritos resulted in the creation of the Doritos Locos Taco. To say it was a massive hit is an understatement. Within the first 18 months of the new product launch, Doritos Locos Taco sales surpassed 800 billion.

6. Acquisitions

There are some distinct advantages to acquisitions. They allow you to reduce competition by acquiring direct competitors. They allow you to gain access to proprietary technology that would take significant time and money to develop yourself. And they give you access to the acquired company’s customer base.

7. Organic growth

Out of all the business growth strategies, organic growth is by far the ideal. It means you’re able to spur growth without the reliance on mergers and/or acquisitions. As for your marketing strategy, it means you’re growing without the need for advertising, where once you stop spending, you stop growing.

Largely through organic growth, a home goods startup in a $29 billion market went from zero to a 3% market share within 5 years. Organic search was a major factor in the rapid growth, with the startup attracting 4.1 million organic visits to its website each year.

With organic growth, your customer acquisition cost is lower, your return on marketing spend is higher, and it puts you on a frictionless upward trajectory. The more organic growth you can achieve, the less you have to spend on marketing and the more you can invest in further developing your brand, developing new products, and delighting your customers.

Combine business growth strategies to win

The fintech company, founded in 2005 in Stockholm, Sweden, enables consumers to make product purchases without full payment at checkout. Rather than pay in full, shoppers can divide their payments into four interest-fee installments, pay the full amount within 30 days, or extend payment up to three years. The result is a 45% increase in average order value from shoppers paying with flexible installments.

Klarna has also been focused on geographical expansion, entering new markets across Europe and finally the U.S. Today, Klarna delivers flexible purchase options to 90 million consumers across 250,000+ merchants in 17 countries. More than 2 million transactions are processed globally through Klarna technology daily.

Growth Strategy Examples

Increasing market penetration

In many ways, trying to increase market penetration is a bit of a win-lose game where every new customer you make is a customer loss for another company that’s targeting the same market. Put simply, increasing your market share implies serving customers that would otherwise be served by a competitor (aka stealing other companies’ customers).

For example, in the cloud computing industry, Amazon Web Services (AWS, a company owned by Amazon.com) has retained most of the market for many years, but Microsoft’s Azure service has been growing at a fast pace at the expense of AWS’ market share.

Targeting new customer segments

Chobani line of products

For example, yogurt maker Chobani has introduced different presentations for its yogurt offers that go well beyond its popular fruit-in-the-bottom presentation. It now features Flip®, a yogurt-based snack that students and office workers can grab “on the go,” and a yogurt drink that has amassed avid fans among sports enthusiasts who consume it as a post-workout drink.

Entering new markets

Consider the case of a motor oil company that makes and distributes lubricants for the automobile industry. To serve its markets the company has distribution deals with auto repair shops, department stores, and gas stations since those are the places where their target customers, i.e., car owners, usually buy motor oil.

In an expansion effort, the company could decide to create a new brand of oil targeting trucks and the heavy machinery industry. Although the underlying product is relatively the same, its distribution channels, customers, pricing policies, presentation, and even its business model will have to be different because the company will be now attacking a different market.

Selling new products to existing customers

For example, when ride-sharing app Uber introduced its food delivery service Uber Eats, it leveraged its vast user base to promote the service and millions of their existing customers immediately downloaded the new app within a few hours. Any other food delivery service trying to compete against Uber Eats will be at a big disadvantage if it has to build its audience from scratch.

Creating complementary products

A potentially great way to increase sales in operating businesses is through the development of complementary solutions that help increase demand for your products. Think about Nestlé’s success with its Nespresso machines which multiplied sales of its coffee products and helped the company leapfrog in the very competitive coffee space.

Nespresso innovative products.

Nespresso turned out to be a great “vehicle” to deliver Nestlé’s coffee products, making it a perfect match for the company, reminding us a little of the success of Gillette’s famous razor and blade business model that we mentioned earlier.

Productization of the value chain

Another area that’s usually ignored, but that could offer important growth opportunities, is what we call the productization of the company’s value chain. In other words, taking something that the company is very good at and offering it to third parties as a standalone product or service.

For example, back to Amazon Web Services (AWS), the company allows companies around the world to use Amazon’s vast array of servers and cloud computing tools for their own purposes. AWS leverages a technology platform that Amazon already needed anyway to run its own operations and makes it available for third parties to use for a fee, giving Amazon the opportunity to scale this operation to levels it would never have reached on its own.

Shifting focus from customers to buyers or vice versa

You may find space for growth by exploring the relationships between buyers and users that exist in your markets. In the healthcare space, for example, some companies have stopped promoting their products to doctors, which most providers do, and instead refocused their efforts to reach patients directly through targeted advertising and promotional efforts.

Inorganic Growth Strategy

I have found that most definitions of inorganic growth (also known as non-organic growth) try to limit it to mergers and acquisitions (M&A), however they leave out two alternatives to M&A that I believe should be evaluated before considering an acquisition: strategic alliances and corporate investment.

To make sure we are not limiting ourselves too much, let’s define inorganic growth as any growth strategy that results from controlling another company’s resources, rather than developing those resources ourselves.

In most cases, you will go the inorganic route as a way to produce rapid and strategic results, catch up in a market where you were left behind, access key assets and intellectual property, or to build synergies to put your company in a favorable position against competitors.

This means that inorganic business growth are almost always of a strategic nature and involve certain levels of risks, especially M&A, but those risks can be mitigated by testing the waters first through one of the alternatives.

Strategic growth alliances

At its most basic level, a strategic alliance is a collaboration agreement between at least two companies to pursue a common set of strategic growth goals and is usually a cost-effective alternative to an acquisition or a merger.

This is what car manufacturer Ford and clothing retailer Eddie Bauer did when they joined forces to create the widely successful Ford Explorer Eddie Bauer Edition, which featured premium leather seats and other luxury perks in an effort to compete with Japanese companies in the luxury SUV market.

One reason to consider a strategic alliance instead of a full-blown merger is that an alliance can achieve most of the same growth strategy goals without the commitment and complexity of the real thing, making it a good alternative to see how the companies work together before making bigger commitments.

The obvious downside of a strategic alliance is that we have to share the profits that the collaboration produces, and the fact that managing the combined effort as two separate companies may turn out to be more difficult.

A particular form of strategic alliance is the Joint Venture (which is normally referred to simply as a JV), where two or more companies co-invest in a new entity to undertake a new business or tackle a market together.

A JV can be executed between private companies only or it can exist between government and private entities, an arrangement that’s usually referred to as a Public-Private-Partnership or PPP. These are very popular in developing countries to promote private participation in public projects.

Strategic alliances work best when the capabilities of the companies are complementary in nature, and not competitive with respect to each other. For example, a company that provides industrial equipment could partner up with an engineering firm that provides design and construction services.

Just as you’d do for a merger or an acquisition, you must do extensive research and due diligence on the potential partner to make sure their growth strategy goals for the partnership align with yours, and that the final agreement will be manageable.

Corporate investment

Another way to test the strategic growth waters without getting too wet is by investing in companies that operate in a space that’s attractive for us. This is somewhat popular in large corporations and is a judicious step prior to a full acquisition.

These investments can be done by directly acquiring a minority piece of the target company, or by allocating money in common investment funds (e.g. private equity funds) which find and screen companies operating in a particular space.

A new trend that’s becoming popular for making direct investments in early stage companies is by creating a Corporate Venture Capital (CVC) arm inside your company that finds and screens potential targets in need of seed, growth or expansion capital.

Through a CVC program, you create a fund to invest in startups in the form of equity. With this, your company becomes a shareholder in the entrepreneurial company as a way to keep a close watch on its developments and progress.

It is startups, not large corporations, that usually redefine industries and change the ways of doing business. Our corporations are usually slow, bureaucratic and careful, while startups are agile, creative and fearless.

If well structured, a CVC plan should be a win-win for both sides: the startup gets access to funds and markets, while the corporation gets to expand its product portfolio with cutting-edge developments without the risks and costs of an in-house innovation effort.



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