Q: I'm currently sorting out a number of options for growing my business. How do I determine when, and how quickly, I should attempt to implement growth strategies?
A: "When" you should implement strategies designed to grow your business is a matter of timing and is represented by the exact date on which you will start applying the elements of any one, or multiple, growth strategies. "How Quickly" you attempt to grow your business is called your "pace" of growth and is measured by the rate of growth that you are seeking as a result of implementing one or more growth strategies. Both the timing and pace of your business's growth efforts have a substantial impact on the eventual success of growth efforts and should be appropriately applied in tandem when implementing each strategy.
Real business growth occurs when your business is experiencing permanent increases in profit as a direct result of measurable and sustainable increases in sales volume. Even though your business is enjoying increased sales volume, unless these additional sales dollars contribute to the business's bottom line, they are only symptomatic, and could be considered to be a form of temporary "ghost growth"--giving your business the appearance of growth, without creating the required underlying increases in profit.
Business growth is best achieved by matching the timing and pace of your business's growth initiatives to market demand. Ideally your business will enter the marketplace with growth strategies that are designed in response to either untapped existing demand for its products and services and/or to take advantage of any rapidly emerging new demand.
Several scenarios that may generate increased market demand for your business's products and services are:
- Entry into a heretofore-untapped market (such as when your business enters a market for the first time.
- The advent of new products or services (complementing your existing product mix).
- An increase in size of the marketplace (perhaps in response to a major employer opening a new location within your target market).
- A competitor leaves the market (by eliminating part of their product line or by closing their doors altogether.
- Consumers experience a major change in their tastes (such as the movement from land line telephone service to the use of mobile phones).
- You create new demand where it does not yet exist (note: this can be very costly in terms of time and money, and can have a high degree of risk that it will fail to generate the anticipated profitable sales increases).
- The identification of new target markets (such as a new city, state or the world, via the Internet).
If you attempt to insert growth strategies in advance of market demand, your efforts may be wasted on customers who don't believe they need your products or services; and if you enter the market late, you may have lost the opportunity to capture market share, as your competitors may have already done so. By the same token, if your growth strategies attempt to create increased sales too quickly, your marketing efforts and their corresponding costs may be disproportionately high as compared with the market's ability to process and react by initiating new sales. Furthermore, if your growth strategies underestimate the market's demand and are introduced too slowly, your business may not reach all the potential customers when they are ready to buy, and your business will suffer a lost opportunity to grow faster.
Remember that the process of business growth is ongoing. For this reason, you are encouraged to include both long-term and short-term growth strategies in your plans. By continuously being attentive to growth opportunities, you can avoid the dual risks of experiencing a reduction in your business' sales volume and a corresponding loss of profitability.
David Meier received an MBA in Finance from Loyola of Baltimore, and spent much of the 1970s teaching business courses; later, he created a consulting group, and for the next two decades, provided accounting and tax services to small-business owners. He is currently the founder and COO of Small Business 411, which provides small-business owners with ongoing business coaching and the knowledge and support required to enable them to become truly successful entrepreneurs. Visit the Small Business 411 site at http://www.smallbusiness411.com
The opinions expressed in this column are those of the author, not of Entrepreneur.com. All answers are intended to be general in nature, without regard to specific geographical areas or circumstances, and should only be relied upon after consulting an appropriate expert, such as an attorney or accountant.