Part
of getting from A to B, then, is to put together a growth strategy that,
McFarland says, "brings you the most results from the least amount of risk
and effort." Growth strategies resemble a kind of ladder, where
lower-level rungs present less risk but maybe less quick-growth impact. The
bottom line for small businesses, especially start-ups, is to focus on those
strategies that are at the lowest rungs of the ladder and then gradually move
your way up as needed. As you go about developing your growth strategy, you
should first consider the lower rungs of what are known as Intensive Growth
Strategies. Each new rung brings more opportunities for fast growth, but also
more risk. They are:
1.
Market Penetration. The least risky growth strategy for any business is to
simply sell more of its current product to its current customers—a strategy
perfected by large consumer goods companies, says McFarland. Think of how you
might buy a six-pack of beverages, then a 12-pack, and then a case. "You
can't even buy toilet paper in anything less that a 24-roll pack these
days," McFarland jokes. Finding new ways for your customers to use your
product—like turning baking soda into a deodorizer for your refrigerator—is
another form of market penetration.
2.
Market Development. The next rung up the ladder is to devise a way to sell
more of your current product to an adjacent market—offering your product or
service to customers in another city or state, for example. McFarland points
out that many of the great fast-growing companies of the past few decades
relied on Market Development as their main growth strategy. For example,
Express Personnel (now called Express Employment Professionals), a staffing
business that began in Oklahoma City quickly opened offices around the country
via a franchising model. Eventually, the company offered employment staffing
services in some 588 different locations, and the company became the
fifth-largest staffing business in the U.S.
3.
Alternative Channels. This growth strategy involves pursuing customers in a
different way such as, for example, selling your products online. When Apple
added its retail division, it was also adopting an Alternative Channel
strategy. Using the Internet as a means for your customers to access your
products or services in a new way, such as by adopting a rental model or
software as a service, is another Alternative Channel strategy.
4.
Product Development. A classic strategy, it involves developing new products
to sell to your existing customers as well as to new ones. If you have a
choice, you would ideally like to sell your new products to existing customers.
That's because selling products to your existing customers is far less risky
than "having to learn a new product and market at the same time,"
McFarland says.
5.
New Products for New Customers. Sometimes, market conditions dictate
that you must create new products for new customers, as Polaris, the recreational
vehicle manufacturer in Minneapolis found out. For years, the company produced
only snowmobiles. Then, after several mild winters, the company was in dire
straits. Fortunately, it developed a wildly-successful series of four-wheel
all-terrain vehicles, opening up an entirely new market. Similarly, Apple
pulled off this strategy when it introduced the iPod. What made the iPod such a
breakthrough product was that it could be sold alone, independent of an Apple
computer, but, at the same time, it also helped expose more new customers to
the computers Apple offered. McFarland says the iPhone has had a similar
impact; once customers began to enjoy the look and feel of the product's
interface, they opened themselves up to buying other Apple products.
If you choose to follow
one of the Intensive Growth Strategies, you should ideally take only one step
up the ladder at a time, since each step brings risk, uncertainty, and effort.
The rub is that sometimes, the market forces you to take action as a means of self-preservation,
as it did with Polaris. Sometimes, you have no choice but to take more risk.
