Let’s face the reality of an economy where GDP is anemic: organic growth opportunities for your business are limited. Rather than rely solely on stealing away customers from your competition or trying to differentiate by price alone, consider these three strategies as an investment in the future of your business. I have included my own personal insight about each option.
Grow through acquisition
The right acquisition can jumpstart growth. For example, a company with a desirable footprint or customer base provides a foundation that doesn’t have to be built. Now is a good time to consider an acquisition, as baby boomers looking to retire are considering their exit options. In our closely connected market where we affectionately joke about two degrees of separation, start the process by talking to your contacts and advisors. For example, we have connected many buyers and sellers together by tapping into our local connections and existing business relationships.
Insight: Carefully consider the financial resources needed. Know what you can afford by understanding how much more you can leverage your balance sheet. You can also look at the assets, cash flow and accretive savings of the company you’re looking to acquire. There are a variety of financing options available involving both buyer and seller, and your banker and accountant are there to provide solutions.
Grow through entering new markets
While a common growth method is to expand nationally or globally, expansion can come from new target customers without leaving your own neighborhood. Ask yourself what other groups might benefit from your product or service if you modified the packaging or service features. A slight tweak to a software program or injection molding process could fill an unmet need for a different industry. And don’t forget about the power of the Internet for growing sales online!
Insight: Measure the risk vs. return. Estimate the costs of the new endeavor. Use what-if scenarios with a range of potential outcomes. Can your business survive the stress of the worst-case scenario? Give your accountant and banker the opportunity to offer their views.
Grow through extending your product or service line
Start by understanding the lifecycle of your prospective product or service – lifecycle is central to profitability. If the proposed new product is in the introduction stage, expect to spend heavily on marketing. If you deem it to be in the maturity stage for the industry, it may not make sense to invest in developing it yourself.
Insight: Manage investment and cash flow. Costs – staffing, materials, technology, market research, prototyping and incremental overhead – can add up quickly. Talk to your banker or accountant to review the strength of your balance sheet and cash flow.
As you consider any of these strategies, take an inventory of your capacity to grow, looking beyond the financial issues. Scalability of your sales, operations, service and administrative areas are crucial, as is a corporate culture of flexibility and adaptability. Assess the talent within your company – from established leaders to emerging leaders looking for an opportunity to make a contribution and grow. Before you set your plan in ink, talk to your business banker and accountant. Both have the experience to provide practical insight and options to help make your plans a reality.
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