5 min read
How do small businesses grow?
Small businesses grow by hustling and refining their processes. While there are countless ‘growth strategies’ out there for all kinds of businesses, they’re ultimately underpinned by working both harder and smarter (with the aim that, over time, you don’t have to do as much of the former). This often involves casting aside preconceived notions of what works and what doesn’t, and laser focusing on trying new things to generate a greater volume of sales.
Why is business growth important?
Growth is important to protect the long-term survival of your business and maximise your profit. Larger businesses are more capable of holding their position in the market due to things like lower costs (via economies of scale), bigger brand presence, attraction of better talent, and greater freedom to diversify, take advantage of new opportunities, and expand their product or service line, with less risk.
What are the stages of business growth?
Seed - Your business has just launched and you’re working on refining your product or service with early adopters (perhaps friends, family or former colleagues).
Growth - Your business has an offering that appears to resonate with the market, and you’re looking to attract more customers.
Stable - Your business’ initial period of explosive growth is now behind you, ways of working are established, and
Expansion - Having established itself in your home market, your business looks to enter new markets / expand internationally.
Exit - Whether you’re looking to sell your business on or shut it down in its decline, this is the stage where it all comes to an end.
What are the drivers of business growth?
There are 11 broad drivers of business growth:
Addressable problem - Businesses that are addressing a problem for their customers which clearly and significantly impacts their bottom line are likely to drive greater growth.
Customer centricity - Businesses which more deeply understand their customers and their problems and needs are more capable of delighting them than their competitors, making them more likely to drive greater growth.
Strategy - Building growth plans into your strategy is key to achieving it. This may come from providing new products or services, innovating how you provide existing ones, or expanding into new markets.
Proprietariness - Businesses need to be able to offer something unique to stand out above their competitors and capture more of the market. This may be product-related (e.g. Google’s search engine algorithm) or it could come from the insights you, and only you, can derive from customer data.
Scalability - Businesses that are capable of delivering their product or service to an exponentially increasing amount of customers without needing to use proportional resources to do so are better placed to drive greater growth.
People and process - Businesses with top talent who are empowered to deliver quality work with no unnecessary red tape are likely to drive greater growth. To attract, retain, and leverage top talent, businesses need to promote diverse thinking, deliver a clear vision and values that everyone buys into, and maintain strong leadership that nurtures individuals, strives for effectiveness and efficiency, and isn’t afraid to change things up when they’re not working.
Technology - Businesses that recognise the value of data, capture the right data, and store, process and manage it in a clean and effective way are likely to drive greater growth. Knowing how to translate data capture into clear, value-driving actions is a difficult but highly valuable skill.
Risk - Businesses that approach risk strategically and intelligently, rather than simply avoiding it out of fear, are likely to drive greater growth.
Reporting - Businesses that know how to effectively and efficiently report from the ground level up to the executive team, between the executive team and investors, and back down from the executive team to the ground level again, are likely to drive greater growth.
Partnerships - Businesses that recognise the value of strategic partnerships and leveraging the audiences of complementary businesses are better placed to drive greater growth.
Funding - Businesses that are better funded are more capable of driving greater growth, however simply having more funds doesn’t guarantee it. Businesses need to know how to generate the maximum return from their available funds.
How can business growth be measured?
A company can measure its growth by sales revenue, profit, or market share. Track these metrics over time to see the rate of change, and compare to industry benchmarks or publicly-available information on competitors to see where you stand.
What is the average business growth rate?
The average business growth rate depends on industry. Different types of businesses can experience dramatically different growth rates. Angel investor Tim Berry suggests that “industry overall grows about the same rate as the economy, which is 2-3% in a good year”, that 7-8% per year is above average, and over 20% is “outstanding”.
What does a growth strategy involve?
A growth strategy involves focusing on actions that help your business win a larger market share over and above short (or even medium) term profits. It is characteristic of tech startups to disproportionately focus on growth in the early stages, relative to other more traditional businesses.
What does a growth plan look like?
A growth plan commonly contains one or more of four elements - product development, market penetration, market development, and diversification.
What is growth hacking?
Growth hacking is the process of undertaking lesser-known or experimental actions to drive disproportionately high growth. It is characteristic of tech startups, where there may be low resource to achieve growth targets, or extremely high growth targets set by investors (where a startup is well-funded).
How does technology help business growth?
Technology is one of the key drivers of business growth. Businesses that recognise the value of data, capture the right data, and store, process and manage it in a clean and effective way are likely to drive greater growth. Knowing how to translate data capture into clear, value-driving actions is a difficult but highly valuable skill.
How can social media help business growth?
Social media can help business growth through generating an audience which can be converted into leads and/or new customers. This audience, or following, can be developed organically (i.e. without any paid activity) or by paying to promote content beyond your existing audience.
What is 'sustainable growth' in business?
Sustainable growth is growth that can confidently be achieved on recurring basis without dramatically altering the growth strategy. It is more characteristic of bootstrapped businesses - that is, businesses funded out of the founder’s own cash - to seek sustainable growth, unlike externally-funded businesses where investors are seeking higher, shorter-term returns.
What are the barriers to business growth?
There are 11 broad barriers to business growth:
Insignificant problem - Businesses that are addressing a problem for their customers which does not clearly and significantly impact their bottom line are likely to be hindered from growth.
Customer ignorance - Businesses that do not deeply understand their customers and their problems and needs are less capable of delighting them than their competitors, and are likely to be hindered from growth.
Lack of strategy - Businesses that don’t explicitly build growth plans into their strategy are unlikely to achieve it.
Nonexclusivity - Businesses that cannot offer something unique to stand out above their competitors are unlikely to capture much of their market, and thus are likely to be hindered from growth.
Unscalability - Businesses that require a proportional amount of resource to deliver their product or service to an increasing amount of customers are likely to be hindered from growth.
People and process - Businesses that are unable to attract, retain and nurture top talent are likely to be hindered from growth. Similarly, lacking diverse thinking, a clear vision and values, or strong leadership will also hold businesses back.
Technology - Businesses that don’t recognise the value of data or data-back decisions, or that don’t store, process and manage their data in a clean and effective way, are likely to be hindered from growth.
Risk ignorance or averseness - Businesses that do not account for risk or that instinctively avoid it out of fear, rather than considering it strategically and intelligently, are likely to be hindered from growth.
Reporting - Businesses that do not effectively and efficiently report from the ground level up to the executive team, between the executive team and investors, or back down from the executive team to the ground level, are likely to be hindered from growth.
Going it alone - Businesses that do not engage in strategic partnerships to leverage the audiences of complementary businesses are likely to be hindered from growth.
Funding - Businesses that are poorly funded are less capable of acquiring the resource they need to effectively and efficiently grow, and businesses that don’t know how to generate the best return from their available funds are likely to be hindered from growth.
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