5 Strategies for Business Growth

Thinking about long-term growth for your business can fall by the wayside when you’re focused on day-to-day operations. But it’s worth carefully considering the pros and cons of the many different growth methods.

5 Strategies for Business Growth

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Sometimes it seems like there isn’t any energy or time left after getting through the day’s jobs. Growing the company — whether strategic or incidental — becomes an afterthought. Hall of Fame football coach Lou Holtz once said, “In this world you're either growing or you're dying so get in motion and grow.”

Many companies in this industry pride themselves for growing on word-of-mouth alone. That’s something to be proud of for sure, but there is also a danger to this strategy. First off, it’s leaving your business growth somewhat to chance. Second, it means that you might be leaving some good opportunities on the table. Not everyone’s goal is world domination, but without some intentional strategy, you may be killing your company by default.

On the other hand, when you get a little bit of success, it can become addictive. You feel the pride, stability, and prosperity that come with running a successful small business and start to crave more. At this point, growth strategy becomes about reducing risk and using resources wisely.

Growth strategies come in a lot of different shapes and sizes. The first step in deciding how to grow is understanding your options. Here are some ideas to consider:

Market Penetration

Market penetration considers how many people, of the currently available customers, are doing business with you. If there are 100 potential customers and you do business with 10 of them, you have a 10 percent market penetration rate.

“Getting more customers” may seem like an overly simple growth strategy, but it is worth looking at first. Often, this is the least risky and most attainable growth strategy. The question is how you are going to make that happen.

Usually, increasing sales from your existing market requires a price reduction, like a promotion or increased marketing.

Many people aren’t a fan of discounting service, and I agree with them. Not only does it devalue the labor, but also the cheapest is rarely the best. Customers know that. It can get a customer through the door, but you may have to continue to offer discounted pricing to keep them. Unless you have a very firm grip on your numbers, this is a dangerous game to play.

Marketing efforts or sales can be effective, if executed properly. There is a bit of a risk in spending money and hoping for results, but always ask yourself how you are tracking the return on the marketing investment. Stick to tactics that allow you to track that easily, and don’t sign unnecessary contracts.

Finally, keep in mind that this strategy has a shelf life. At some point, you will reach market saturation. That will never be 100 percent unless you are the only drain cleaner in town, so don’t even try.

Market Development

Market development looks for opportunities to bring your current services to a new set of customers. Geographic expansion is the most common tactic for this, and a fairly obvious growth strategy. Keep doing the same work in more places.

Some may argue this strategy has minimal risk, but don’t take it for granted. You probably saw success in your current geographic market because you understand the area and the customers. Moving to a new area means you don’t have a network to build customers from, it means you don’t know the suppliers or the inspectors, and there may be different codes or common problems than you are used to dealing with. Everything from soil type to climate can change plumbing practices, so don’t take your success for granted in another market. 

Another way to develop the market is to bring your services to a different time, rather than a different place. Expanding service hours or offering emergency service is another way of developing the market to build your business.

Service Expansion and Diversification

Developing new service categories is a great way to build a business. This might mean the purchase of new equipment that diversifies your offerings, or it might mean expanding the type of work you do.

Training and market research are incredibly important to this type of expansion plan. It isn’t as simple as buying the new, shiny machine at the trade show. You have to understand your market, understand your talent pool, and consider whether you can sell to your existing customers or attract new ones.

For instance, you could add septic pumping services. But do you have an employee with a CDL or will you have to find one? Are septic tanks popular in your area? How happy are customers with the current septic service providers? All of these questions and more should be considered in order to reduce risk and make sure that your investment is well-utilized.

Unrelated Diversification

Your business can do more than just sell plumbing related services. In fact, you may even be able to add revenue streams that have nothing to do with plumbing. The most common example of this is real estate.

If you have extra space in your facility, could you rent a portion out to another company? That would be one simple example of adding a revenue stream to your company that has nothing to do with plumbing. Be creative, and look at your assets. If there is something that can be leveraged, there might be an opportunity to grow your company in a direction that you never before imagined.

Merger and Acquisition

The idea of buying another company might seem intimidating, but it is actually very common. Even small companies can acquire. This is a fast-track way to create growth, but it does require upfront capital.

Most people immediately consider buying a competitor. That can be a great way to increase market share, but that isn’t the only kind of acquisition out there.

Consider backward and forward acquisition as well. Backward acquisition is when you purchase a supplier. For instance, if you work with a leak detection company who provides you leads for slab leak repairs you could buy that company — now you have revenues for the leak detection and the repair.

A forward acquisition would be exemplified by buying a fixture retailer. If there is a showroom for plumbing remodel or fixtures that you would like to do the install work for, acquiring that company is a surefire way to get the contract.

Brainstorming Ideas for Growth

These are far from the only types of growth opportunities, but that is the exciting part. There is so much opportunity in this industry that there are no limits to the success you can enjoy.

When you sit down to consider where your next growth opportunity lies, you should take the process seriously and do your research. Start with a simple brainstorming session. Write down 10 to 20 ideas — crazy, big, small, serious and everything in between. Once you have that list, pick your top five to do a strategic planning session for.

List each strategy. Next to each one, in a new column, list the immediate resources you would need in order to execute it. Put numbers on these if possible — understand the capital, people, process, and administrative costs that are needed to pursue the opportunity.

Next, look at the pros and cons of each strategy. Be honest with yourself about the day-to-day impact this will have on your business and your life. Cap this section off with a revenue estimate of what this strategy might add, in dollars, to your business every year. As much research as you can do to accurately predict this number, the better. Don’t pick a number out of thin air.

Finally, list the initial steps to take to implement the strategy.

Now you are ready to consider your five options. You know your resource cost and your potential upside. You know the pros and cons of each and how you are going to get started.

When presented in this easy-to-read format, with all of the facts laid out before you, decisions become easier. Making growth decisions, not on whims but on facts, is important to the success of your company.

There is no right or wrong to growth strategies for your business. Each company is unique. Look for opportunities that excite you and play to your strengths. A final tip: Don’t discount the effect a growth opportunity will have on your personal life. If there is a great opportunity but it will disrupt your quality of life or goals for your family, that could be way more important than the money it would bear. 

About the Author

Anja Smith is managing partner for All Clear Plumbing in Greenville, South Carolina. She can be reached at anja@acpupstate.com.


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