6 Business Strategies for Growth and Profit
1. What is Business Strategy?
If business is about delivering a product or service to customers profitably, then business strategy is the way you do it in order to achieve your growth and profit goals.
The most common enquiry I hear from business owners is how to generate more sales or more leads. Often the answer is to change their business strategy first. After you get that right, developing sales and marketing (your Growth Engine) is pretty straightforward.
In this article, I’ll help you to understand why business strategy matters to you, how it can help you to build a better, more profitable business with greater potential for growth, and you'll get three specific strategies that work well for businesses that want to grow bigger.
But first, let's make sure you're starting with the right end goals in mind.
2. Create Your Business Strategy Around Your Own Goals
Your business strategy needs to start with your own personal goals. You’re in business for yourself - so make sure you build a business that helps you build, and live, the life you want to lead.
If you want to build wealth quickly, then creating a business with the aim of selling it within a few years, would mean building a business that is not only profitable, but that your employees can run profitably without you. A business that needs you to run it, is difficult to sell and far less attractive to potential buyers.
The key thing is to aim for a lifestyle you really want and can imagine. Don't just shoot for big numbers because it seems a good thing to do, or that you 'ought to' because that's what others want from you.
You would be surprised how many business owners tell me their goal is to hit £1 million sales but then don't want to work more than an 8 hour day, take 5 weeks holidays and start a family at the same time. In truth, it’s a random figure that many like the idea of, but few are committed to achieving with any sense of dedication.
That's because there’s a dynamic to running your own business that means you’ll normally have to work extraordinarily hard for a number of years before reaping the rewards.
So consider your goals - one way I've found useful is to boil it down to three big psychological drivers: time freedom, money freedom (buying power), and recognition from others.
Balanced against the future rewards for being successful in business, you’ll need to consider the the price you’ll have to pay in order to reach them. And you should consider this seriously.
The price you pay for achieving your goals can grouped under two broad headings: Work Ethic and Sacrifices.
Your Work Ethic covers how committed you’ll need to be in order to get what you want. Many would-be millionaires flounder because they are not prepared to focus 100% on achieving their goals. Getting out of bed early every day, sticking to your guns, dealing with under-performing staff, picking up the phone to cold-call potential customers.
The Sacrifices to be made at the alter of business growth are all the obvious ones, like late nights and missed holidays, money getting tight and not saying goodnight to your young kids most nights.
My friend Mike Seddon was diagnosed with terminal cancer in June 2015 and given weeks to live. He recorded a webinar where he talked about 5 key questions to ask yourself about your business. About an hour or so long, it’s well worth a listen because he had a unique perspective about your goals and work/life balance. You can watch a recording of the webinar here - http://seddondays.com/the-last-webinar/
Once you’ve determined your personal goals, you can build a business strategy that leads to them.
3. What Are You Selling, And Who Do You Want To Sell It To?
It’s an obvious first question, really. Are you selling something that enough people want to buy? Let’s break this down into a few sections. There’s a lot to cover, and it might feel a little bit theoretical at first, but I promise we’ll get practical again very soon afterwards.
We’ll start by looking at The Ansoff Matrix. It’s a grid with four segments like this …
For each quarter of the grid, there are different benefits and risks. Let’s go through them in turn...
1. Enter An Existing Market, Selling a Service/Product They Already Buy
With this approach, you pick your ‘starving crowd’ and then market your business to these customers. With an existing market, you know that there are lots of people who are ready and willing to buy. But existing markets are commonly very competitive places to operate - it can be tough to win a lot of business from other companies if you’re selling more or less the same product.
So you need some kind of competitive advantage in order to give you an edge - you’ve got to deliver the product or service in a way that sets you apart from your competition - i.e. you need a clear unique selling proposition, and it’s got to be something that will persuade people to buy from you instead of who they’re already buying from.
2. Enter An Existing Market with a New Service/Product
This time we find a market who we think we could serve better with a slightly different service or product. So you innovate and provide them with something that they can’t currently get anywhere else, but which they will want to buy.
The big risk inherent in this strategy is that your passion and enthusiasm for your product/service clouds your judgement. When you enter the market, you are frustrated because nobody seems to want to buy it. And that’s something many businesses fall foul of - they try to sell something that people just don’t want to buy.
3. Enter A New Market with an Existing Service/Product
Sometimes a successful product or service can be transferred easily into a new market, finding easy acceptance because what you’re bringing is already proven in a different sector.
Marketing for this approach will need education, where you demonstrate how your product/service will benefit the customer and draw parallels from the other, more developed market(s). The risk with this approach is the time it will take to persuade the new market to start buying your product in sufficient volume to make your business viable.
4. Enter a New Market with a New Product
Perhaps the most risky strategy of all is to start selling brand new products and services to people who’ve never previously bought that kind of thing. Here you face a monumental task of educating the customer to understand how the product/service can help them and then persuading them to part with hard cash to buy it from you.
4. Some Practical Business Strategies for Small Business
So if the Ansoff Matrix gives you 4 broad-brush strategies, how do we use this in practice to help us build a strategy for rapid growth?
Well, it turns out that we’ve got a few strategies we can use again and again with a good chance of success. Here are three of them:
Strategy #1 - Differentiate with a USP
Set yourself apart from your competition with a USP (unique selling proposition or unique selling point). It gives people a clear reason to buy from you instead of the competition.
You can differentiate with...
- Unique features and benefits that only you are offering. This doesn't need to be unique in the world, just unique to the customers you serve.
- Guarantees and warranties that take the risk away for the customer, letting them feel confident to buy from you in the knowledge that you're willing to give their money back if they're not happy.
- Becoming an authority in your field by writing a book, public speaking or in some other way becoming a 'go to' expert in your marketplace.
- Build a powerful brand that people can identify with. Then you can use the same brand to launch various products and build instant credibility (you see this happening a lot with things like beers and ciders).
For further reading, take a look at this article about how businesses competing in a very price-sensitive market (diary) have differentiated themselves to give them an edge over their competitors.
Strategy #2 - Specialisation
Pick a single niche market that’s big enough to fulfil your growth ambitions. By specialising, you can immediately talk in a language that your customers will be comfortable with, and set yourself apart from the general suppliers who sell to anybody.
Ideally, if you can identify a market that’s not got any specialists in the services/products that you provide, you can become the number one supplier to that market simply because you're the only one in the sector.
This was the strategy that one of my clients, Burrstone Recruitment, adopted when they became the only recruitment company specialising in Offshore Fabrication Yards. This is a sub-sector of oil and gas that makes oil rigs and other things for use out at sea. Because of this specialisation, they were able to grow annual turnover to almost £1m in their first couple of years in business.
Meanwhile another client, Airworld Tours, added £2m turnover rapidly by focusing down on a single destination instead of selling any holiday to any customer. That was in the middle of the recession, too. You can read a little about their story here.
Strategy #3 - Innovation
Create a better product or service than your competitors. You don’t have to create a brand new product to innovate - you can take your product up-market instead, picking off the high-value customers and delivering a premium service that they love. This is normally the most profitable part of the market for you to operate, and if there are enough customers you can build a substantial business by selling premium product to more discerning customers.
For example, for my book, Double Your Business, I interviewed Dr Paddi Lund, an Australian dentist who turned dentistry on it’s head, earning three times the typical dentist’s income and working only 23 hours a week. In the 1980’s he installed a TV in the ceiling of his surgery for patients to watch while he worked on their teeth. He also got rid of the communal waiting room and instead built a coffee-bar area with a huge Italian coffee machine.
Sir Clive Woodward applied some of the lessons from Paddi Lund to forge his world-cup winning England rugby union team in 2003.
5. Does Your Market Have a Future?
A word of caution as you develop your strategy. There is a natural growth and ebbing away of every product.
Petrol and diesel engined cars are probably in their final 25 years of production, having been ubiquitous throughout the last century. Supersonic travel reached a natural end with the retirement of the Concorde fleet.
The diagram here shows the phases of the lifecycle of business. Where in the cycle is your product and its market?
Remember also to factor in disruptive competitors, like Apple's introduction of the iphone into a market dominated by Nokia and Sony/Ericsson?
The world is littered with the gravestones of companies who failed to notice that times were changing. Polaroid cameras were incredibly successful throughout the last quarter of the 20th Century, yet the billion-dollar company behind it collapsed when they didn’t react to digital photography.
Before rushing headlong into a new business strategy, examine your market and consider whether it’s a new, growing market, a mature market, or a market in decline. If it’s already saturated or in decline, you're unlikely to find it a good place for rapid growth. In that case, consider looking elsewhere.
6. These Questions Will Help You Formulate Your Business Strategy
Finally, use these questions to help you explore your business strategy and test it to make sure it's got real legs.
- Who do you sell to?
- What are selling to them?
- Where, When and How do they buy?
- Why should they choose you?
- Will it be profitable?
- Is it scalable?
- Does it play to your strengths?
The easiest way to build a successful business is to find a starving crowd and feed them. By this, I mean if you can identify demand for something that nobody else is satisfying, you’re almost certainly onto a winner. It’s far harder to try to sell what you've got when nobody is interested in it.
Simply sell people what they’ve been craving to get all along.
That sentiment is really at the heart of all business strategy.
It's been my experience that far too many small businesses just provide what every other business is already doing, in more or less the same way, and wonder why they're finding it hard to sell.
On the other hand, set a good strategy and everything else is easier, from marketing and sales, to maintaining solid profit margins.
If you are committed to real, sustainable growth, invest some time in your business strategy - you'll find it's time that will repay you over and over again.
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