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Are you trying to choose a growth strategy for your small business? There is a big difference between saying “I want to grow my business” and actually having a strategy to follow in order to achieve that growth. Luckily there are some tried-and-tested strategies for growing your business. Keep on reading to find out what those growth strategies are and how to choose a growth strategy for your small business.
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Using Ansoff’s Matrix to create a growth strategy
The Ansoff Matrix (sometimes referred to as the Product/Market Expansion Grid) was created by H. Igor Ansoff and first published in 1957. Over half a century later it is still being used by businesses small and large to identify their approach to growth.
Here is what The Ansoff Matrix looks like
Market = Your target market (aka the people you expect to buy your service or product)
Product = What you are selling (so this might be a service rather than a product)
As you can see depending on the combination of new/existing market and new/existing product you end up with four outcomes:
- Market Development
- Market Penetration
- Diversification
- Product Development
Market Penetration
In many ways, this is the easiest way to grow your business and if you are vaguely saying “I want to grow my business” without actively making any changes then this is the strategy you are going for (even if you didn’t know it). Market penetration is where you focus on selling what you already have to the same target market as you already have. This will usually mean you’ll be focusing on marketing to make more people aware of your service or product and take them along the customer journey until they eventually buy.
If you aren’t familiar with the customer journey you can find out more here – How to map out your customer journey.
Market Development
This is where you don’t make any changes to what you are selling, but you think about new markets you can sell to. Very often our services, or products, are more versatile than we think. This is a great option if you have a great product or service, but don’t feel as if there is much potential left in your current target market.
Product Development
On the whole, it is believed that it is easier to sell more to an existing client, or customer, than to have someone buy from you for the first time.
Product Development takes advantage of this theory and says make something new for the target market you already know well and the clients, or customers, you know even better.
Diversification
This is considered the riskiest way to try and grow your business. You create something new and you target new people. Everything is unknown, which is why it is risky, but just because it is risky doesn’t mean it can’t work and provide great rewards.
Now that you understand the four different strategies you could use to grow your small business it is time to find out how to choose a growth strategy for your business.
HOW TO CHOOSE A GROWTH STRATEGY FOR YOUR BUSINESS
When it comes to choosing a growth strategy for your business there is no wrong or right answer. All of the four strategies (market penetration, market development, product development and diversification) have allowed businesses worldwide to grow. So it isn’t a case of one being better than another. However, here are some things to consider.
How many clients, or customers, you’ve already had
If you are thinking about going down the product development route and making something new for your current market then you need to think about the number of clients, or customers, you’ve already had. If you’ve had lots of clients, or customers, before and can think of a great follow up product or service this has the potential to be a great strategy for you. However, if you haven’t had that many clients, or customers, before then a “follow up” product or service doesn’t necessarily offer a great potential for business growth unless the price point means you can generate a large amount of income from a small number of sales.
You would also need to think about the number of clients, or customers, you’ve had if you are thinking about market penetration. If you are an industry that has the potential for 100,000 customers and currently you’ve had 1,000 then you can see that market penetration is viable. There are still another 99,000 for you to target. But if you already have had 20,000 and there are some other big players in your industry you might feel as if the potential to gain more customers is low.
Your desire to create something new
There is definitely more risk in creating a new service or product, but this is your business and if you are excited by creating something new and feel like you have a great idea then going down the product development or diversification route would make sense for you.
Depending on your idea it should be pretty clear whether you’ll be selling to your current market or a new market.
How many services, or products, you already have
Now you might be excited about the thought of adding a new service or product to your business, but you already have 6 different things and none of them are selling particularly well. In this instance, less is definitely more. A new product or service would just make your business, or at least your marketing, more complicated.
Whereas maybe you’ve had been offering one service that sells well and you have a great system for marketing and delivering. In this instance adding something new to your business should be manageable and could offer the opportunity to develop a second income stream.
How big the target market is
If you have a super niche business then you might have a limited number of potential clients or customers. In this instance, it would make sense to try and maximise the revenue per individual. This is often done by giving them more things to buy so you’d think about product development. Whereas if you have a massive target market then it may be valid to concentrate on continuing with the services or products you already have but focus on marketing them more and generating more sales (market penetration).
You desire to work with your current target market (or to work with a new target market)
Some business owners are super passionate about a certain target market. They love the people they serve and want to continue to build a business where they get to work with that type of person. In that case, you’ll most likely choose a market penetration or product development strategy. However, you might love what you do (like me) and can see how the service you provide could easily work for other target markets. For example, I primarily work with coaches and consultants. However, I have worked, and loved working with, accountants, financial planners, copywriters and web designers. I could easily create a service specifically for any of those markets and love delivering it.
There you have it! You’ve now know how to choose a growth strategy for your business.
I hope by now you’ve realised the options you have when it comes to growing your small business. There is no one way, but by thinking carefully about the current situation of your business (and the dream business you want to build) you can hopefully identify the best growth strategy to follow at this moment in time.
It is worth noting that you don’t have to stick to one strategy forever. For example, you might have a business that is currently one service right now, but you build of building a recurring revenue stream via a membership and a passive income stream via a digital course. However, right now you might feel as if you are paid well for delivering your current service and have the capacity to take on more clients. So you focus on a market penetration strategy knowing that in 6 months you’ll have built your business reserves and then be able to invest in creating an amazing membership or digital course.
Right now your need to choose a strategy to get you to the next level, but then once you’ve hit that level you’ll review your business position and then choose what is right to get you to the next level.
In the comments, I would love to hear about what growth strategy you are going to use in your business.
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