When you’ve achieved a first round of “success” as a small business—smooth day-to-day operations, sufficient cash flow to be self-sustaining, and a solid foundation to build on—it’s cause for celebration. But then perhaps your sales stall. Maybe you’ve found your niche, but new customers are no longer knocking down your door. Or perhaps you’re just one of the many entrepreneurs always looking to the next big thing. Either way, a big step into growth is on your horizon.
Expanding your existing small business can take a significant commitment of time and energy, but it doesn’t have to feel like starting all over. For every product or service there are many ways to build on the solid work you’ve begun. Paul Harden, Small Business Growth Hub Director at the RISBDC, shared many great ideas from his knowledge and experience working with diverse small businesses across a wide variety of industries.
Six ways to grow your small business to the next level
1. Sell more to your existing customer base.
How can you encourage your existing customers to make more purchases? For example, if you’re a restaurant and can get current customers to visit twice a month instead of once, you’ve just doubled your sales. This could come in the form of an incentive plan or preferred customer program. Perhaps you can help your customers identify reasons they could use more of your product or service, or make it appealing and simple for them to gift it to others. Or utilize marketing channels (such as social media) that increase the number of “touches” you have with your current customers to keep your business front-of-mind as they go about their day.
2. Add products or services.
Is there a natural way to expand your offerings? Not only will you bring in new customers, but it can also lead your existing customers to spend more. As a steak restaurant, adding seafood to the menu will enlarge your customer base. For service providers, “add-on” services can dramatically increase what your current customers spend. For example, a carpet-cleaning provider expanded his sales by adding upholstery and other interior cleaning to his services. What could your business add easily within your supply chain or service model?
3. Boost your marketing.
How can you increase your marketing efforts to reach a wider audience within your target market? Study your competition to see what channels and techniques they are using to spread word of their brand. Are you ubiquitously present, as a brand, where your target market spends their time? It’s also worth undertaking a marketing audit to ensure that the marketing you are doing is succinctly selling the distinct advantages your product or service provides above and beyond your competition.
4. Horizontal expansion.
Horizontal expansion occurs when you increase the number of ways that you sell or distribute your existing products or services. It includes physical expansions, such as opening a brick and mortar store to complement internet sales, adding more locations to serve your current market, or expanding into new geographic territory. It can also involve marketing your products to a new audience by promoting new uses and applications. Harden described a company that made plastic tool boxes whose primary audience were tool trade workers. Upon discovering a makeup artist using their boxes, they began manufacturing them in new colors and changed their marketing to court women, leading to significant growth. It may take some creativity and reaching out to your customers for feedback on how your products are truly being used, but this type of expansion is a great example of growing a successful business without changing your entire business model. A service-based example would be house cleaners expanding into commercial (office) or boat cleaning, which are simply new applications of existing skills.
5. Vertical integration.
Vertical integration incorporates more of the processes used in the supply and distribution chain of products into your own company. For example, a company that Harden works with that makes household goods out of pewter was previously only involved with the design, purchasing the final product from a manufacturer. When their manufacturer decided to close, they faced the opportunity to buy the company. This presented a big opportunity but also a big risk. They would reduce their manufacturing cost, but their production alone wouldn’t keep the machines busy full-time so they would need to also expand into manufacturing for other companies. This company faced an additional opportunity for vertical integration by adding their own brick and mortar retail outlet to their current model of selling through existing independent gift shops. For many businesses, there will be select opportunities to integrate along the supply chain, and each should be evaluated closely for their pros and cons.
6. Help other companies outsource.
Do you provide a product or service that could help other businesses outsource part of their business model? If you own a cleaning business, advertise your services to the large pool of Airbnb hosts who have to clean their rental between guests. Car detailers may find a large market of dealerships looking to outsource auto prep. Do you provide IT or marketing services that could benefit other small businesses who don’t have a budget for a full-time department? Finding ways to streamline and save time are hallmarks of any successful business in our convenience economy. Take time to think through what your business could provide that other businesses may benefit from.
7. Preparing for growth: Are you ready?
Before jumping into a growth strategy, examine the growth opportunities in front of you and spend some time evaluating the pros and cons of each option in light of your business model and your goals, as well as your ability to commit to a strategy. Try to quantify cost, time, and benchmarks you’ll use to measure success. If you open a new store, what level of new sales or income will be needed to consider it successful? Give yourself a goal and a timeline (say, $250,000 annual sales within two years) so that you can evaluate your growth in the future and determine when it’s time to tweak your strategy or move on to new areas.
You’ll need to dig in to honestly estimate the true costs of your growth strategy. If, say, you’re looking to expand from the east coast to the west coast, you may need to open an office and hire a local team, plus incur travel expenses and time costs away from your existing business. You’ll need to increase inventory and marketing. Can you absorb the startup costs until your expansion becomes profitable? Create a detailed, realistic timeline of where you want to be on the way to your goal.
If you’re having cash flow problems now, growing into a new market or sector is going to be a costly strategy that may need to be put on the back burner until your financial position improves. In that case, look to strategies that would give you a higher ROI until your financial position improves. Or, if you—as the owner—are spending most of your time running your business and it would suffer from your absence while you pursue expansion, you’ll need to be realistic about what you can undertake when your presence is required on the floor fixing problems. In that case, you will want to focus on establishing a secure operational structure that you can step back from before committing your time to exploring growth.
Growth is a wonderful prospect, but it takes commitment, time, and money. Most businesses don’t have the financial and human capital to pursue multiple growth opportunities simultaneously, so it’s important to be selective about which ones appeal to you the most and have the highest chance of success.
RISBDC Growth Hub
Are there internal issues in your company that you need to address before you’re ready to grow? Whether it’s quality or production problems, staffing issues, HR-related issues, or more, the RISBDC Growth Hub can help you identify and address them so you’re prepared to take steps toward the next level. If thinking about these growth opportunities gets you excited, you’re a prime candidate to join us at our next workshop on Wednesday, September 25, at Sprout Coworking.
