What’s the best approach?
Of course, the answer to this question will vary depending on your business and its unique circumstances.
However, here are a few thoughts to keep in mind while building your company’s growth strategy.
Business models are important
Researching and weighing the pros and cons of different business models is an excellent first step in building your company’s growth strategy.
While your company should certainly consider consider various business models, in most cases, it’s almost always a good idea to narrow in on the business models that incorporate recurring revenue.
Your first priority should be to establish an appropriate recurring revenue base to build from.
Expanding on business models that incorporate recurring revenue
Once you’ve established an appropriate amount of recurring revenue you can start to consider a growth strategy that adds more profit to the bottom line.
I personally prefer a growth strategy that increases market share by improving the bottom line, while sustaining an appropriate amount of recurring revenue.
For example, consider the first business I ever launched, a Tallahassee landscaping company.
Our growth strategy was, essentially, a two-pronged approach; we used the profits from landscaping projects to acquire new recurring maintenance accounts.
The more stable your revenue streams are, the more you can leverage your competition.
Increase your bottom line by vertically integrating
One of the easiest ways to increase your bottom line is to sell additional products or services to customers that you already have.
A few questions to keep in mind:
- Can I use the equipment and resources I already have to offer additional products or services?
- Can the additional services generate recurring revenue themselves?
- What type of margin will the additional services generate?
- Do the additional services provide any type of strategic advantage?
Capture market share through acquisition
If possible, you need to try to maintain a certain percentage of recurring revenue.
For example, let’s say you have a real estate business that generates revenue by selling homes and managing rental properties.
To give your company some stability you might want to shoot for a revenue goal of 60% property management and 40% home sells. This way, if home sells drop off, you can survive the drought.
Of course, if you’re trying to increase your recurring revenue you may realize that there’s not a lot of potential for new customers.
If that’s the case, you’ll need to capture more market share by acquiring existing businesses who already have the recurring revenue you’re after.
Quick thoughts on buying out your competition:
- It’s all about timing – if you wait for the right time, you can typically get a better deal. For example, if you had available cash during the recession, you could have acquired businesses at a fraction of the cost.
- Understand customer acquisition costs – just because you have the cash to buy out your competition, doesn’t necessarily mean that it’s the best move. You’ll need to compare the costs against your tradition ways of acquiring customers.
- Understand what you’re buying – before you sign on the dotted line, be sure that you’ve considered all the pros and cons of the purchase. Often times, buying someone’s business comes with baggage.
Implement an organic growth strategy
Another way to grow your business is to implement an organic growth strategy.
Organic growth is generated by more customers, adding new product offerings, and streamlining business operations.
Quick thoughts on implementing an organic growth strategy:
- Start by building an incredible marketing and sales process.
- Consider the different channels available and start with a simple marketing strategy.
- As data becomes available, consider shifting funds to tactics that are generating the best ROI.
- Likewise, use your data to help determine potential future products or services.
At the end of the day, your company’s growth strategy will vary depending on its unique circumstances.
It’s important, however, to remember to reference your growth plan once you’ve started gaining momentum. Don’t be afraid to tweak and refine your strategy, if need be.
What are some ways that you plan to grow your company this year?