Market Research has shown that people are concerned about business growth in a slow economy. While economy can play a part in hindering sales, a good business plan includes methods of diversification that make this concern a non-issue. I wrote about this in my book The Perpetual Money Machine and I am going to share an excerpt with you regarding this challenge:
Without constant growth, your business will not be profitable in the future. Growth is the result of major investment in your company. This is one of the most important processes for your business. You must implement these strategies in order to succeed.
Without growth, profits will fall. As variable and fixed costs increase, if sales remain constant, a yearly reduction in profits will result. Below is an example of how profits can fall if sales remain constant at $1 million and the variable and fixed costs increase at a rate of 6 percent over a 10-year period.
Figure 6-1: Combined Variable and Fixed Costs
The Process of Accelerated Business Growth
There are seven methods that you can utilize in your business in order to obtain a healthy growth rate. In order to implement each of these methods, you must follow the “Eight Steps to Successful Implementation.” In order to successfully achieve the level of growth that you seek, you must first decide upon your desired level of growth and then choose the method that will be the most cost effective and least time-consuming for you to implement. Figure 6-2 shows the seven methods that lead to growth and the eight steps to successful implementation of those methods.
Method 1: Find New Customers
In order to successfully find and obtain new customers, you must focus on your lead generation system and sales conversion rates. You must determine what growth rates your current lead generation system creates and consider new tactics that will help you to achieve your goal growth rate.
Common problems in increasing leads and converting them to sales include changes in the market segment, message or channel, or ineffective marketing or advertising strategies.
Lead generation is comprised of 10 key areas.
- Target Product/Customer Opportunities
- Website Marketing
- Public Relations
- Lead Nurturing
- Phone Calls
- Direct Mail
Finding the right combination of these key areas for your business can be difficult and should not be taken lightly. It is important for each business owner to realize that each business is unique and therefore will benefit from a different combination of these areas than another business in the same industry.
Method 2: Resell Previous Customers
This is the process of retaining customers over long periods of time by finding new and improved ways to fulfill their needs. This can be done through the use of increasing the quality of a product/service or through the amount of relationship building focused on that customer.
A key to selling a current customer a new product/service is to anticipate their needs. By anticipating your current clients’ needs, you may identify a need before they even realize it! This will help them avoid gaps in their development, as you will be able to supply them with products and services before they develop any potential problems.
Method 3: New Product Development
Following industry trends and determining the new needs of your customers before your competitors do are crucial when using new product development as a growth strategy. Being innovative and creating the products/services to meet your customers’ needs before or as they occur can increase your growth a great deal in a relatively short period of time.
In-depth research is vital to the success of this method. Increasing your growth rate through the use of new products/services is sometimes as easy as adding a new service that your customers are in need of so they can obtain more with one company (yours) instead of having to use multiple contractors. A good example would be a construction company that offers additional services such as design, excavation and survey. It is easier for the customer to use your company because they only have to deal with one contractor to accomplish four steps of their process. This saves the customer both time and money; coupled with good customer service and high satisfaction levels customers will want to use your services for future projects as well.
Method 4: Mergers and Acquisitions
Using mergers and acquisitions to increase your growth rate can be an expensive endeavor, but it can also be very profitable. One way of accomplishing this is to put together a process to acquire businesses that are in the same industry as you. If acquiring businesses in your industry is not an option for you, obtaining a new customer base through acquisition in a new market area is the second-best approach to ensuring business growth within this method. The main goal of this method is to increase your market share.
When dealing with mergers and acquisitions, research plays a vital role. You must understand financial statements and develop a formula to make sure that you don’t lose money and do whatever you can to reduce the amount of risk involved. In order to fully understand another company’s financials, you must go through the process of recasting them. The goal of recasting the financials is to determine what are the real assets and liabilities of a company and must be done precisely and in minute detail.
Casted items are extras that someone buying a business wouldn’t be interested in and therefore need to be separated out from the parts of the business that hold value for the purchaser. An example of a casted item is the current business owner’s car.
Method 5: New Market Expansion
This method pertains strictly to the geographic expansion of a business; whether it be opening an office in a new location or simply putting a salesman in a new market, or even using the benefits of the Internet to expand your company.
It is important to do a detailed cost analysis of each option when deciding whether or not to expand into new markets. If the company is based in Detroit but there is an opportunity to gain new customers in Chicago, you must find the most cost effective way of obtaining those customers. If the business need is great enough you might want to consider opening an office closer to the new client base. If there is a great need, but not one large enough to justify opening a new office, simply either hire a salesperson that would work from home in the Chicago area and report to the Detroit office or have a salesperson from the Detroit office travel to Chicago on an as-needed basis to meet the demands of the customer base located there.
Method 6: Pricing and Merchandising
The basis for this method is to change the combination of prices, products and services in such a way that it will increase both sales and profits at the same time. The combination of increasing both sales and profits simultaneously can be achieved by increasing selling volume while decreasing the cost of supplying those products/services or through raising the purchase price of products/services while maintaining or reducing your cost to supply them.
For example, instead of a contractor merely giving a customer a price estimate to manufacture a part or product, that contractor could add consulting services such as design. The contractor could then increase the price of both services because they have now increased the amount of value that they bring to that customer.
Method 7: Developing a New Business Model
Creating a new business could be as simple as creating a new category or as complicated as starting a completely new business. It can be created from an existing customer demand or buying another business as a franchise.
A new business can be created fairly easily and usually quite inexpensively. For example, if a company manufactures regular scissors, it wouldn’t be that costly to add the production of craft scissors. They have the same general design and would use the same manufacturing process, with the exception of the cut used to make the scissor blades.
Starting a new company based on a new product or service idea can be costly, but can also be very profitable. For example, if you own a marketing/advertising company you may find that many of your customers have a need for assistance with creating the technological pieces of their marketing and advertising plan, not to mention the rest of their business. Doing an in-depth analysis would show that there is a large market need for technological know-how and having a company that offers services such as web design, system infrastructure and other software and hardware services would generate enough business that it would warrant being its own independent business.
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