The desire for continuous business growth comes naturally for most entrepreneurs. However, growing a business requires wise planning to create and seize growth opportunities while also avoiding pitfalls and dangers. The careful planning of business growth is our subject today.
Business growth planning defined: Business growth may be measured by several metrics such as increase in sales revenue, profitability, number of employees, number of customers, product diversification, number of branches, increase in fixed assets, etc. The process of developing a business growth plan, that may be required to achieve certain growth measures, is called business growth planning. The product of a growth planning activity is a business growth plan, which is a strategic framework that guides the growth of a business, or part thereof, from one stage to another over a period.
Importance of growth planning: Planning for growth is crucial in ensuring that every action taken is meant specifically towards achieving carefully desired and chosen growth targets. This helps focus all efforts and makes possible the optimum allocation and use of resources. Consequently, goals are achieved with minimum wastage of resources while at the same time maximum possible value is created. The process of business growth planning helps the entrepreneur and their management in thinking afresh and being more creative. It also brings about additional need for accountability in what is to be done and how it will be done.
Furthermore, employees who are aware of the business growth objectives and plans are more disposed to working towards achieving them than those that are not. Stakeholders, such as shareholders, are able to monitor the actual progress made vis-à-vis projected targets. Similarly, financiers can also assess the extent of financial resources that may be required to achieve growth targets and whether or not the projected levels of financing are sufficient, bloated, or inadequate.
Business growth trajectory: To plan for growth, it is important to understand the typical growth trajectory of most businesses and where your business is presently positioned. Generally, five stages are identified as those of ‘Existence’, ‘Survival’, ‘Success’, ‘Take-off’ and ‘Resource Maturity’. A more detailed depiction by Harvard Business Review captures the differences in ‘Management style’, ‘Organisation’, ‘Extent of formal systems’, ‘Major strategy’, and relationship between ‘Business and owner’ in each of those stages.
I like to see those stages in terms of the size, age, market potentials, capacity as well as the position of a business in a market. A caveat, though, is that growth is non-linear because different businesses, led by different leaders, can grow differently, often jumping stage(s). Similarly, stagnation, decline and ultimate death could also happen at any stage, albeit differently, for different possible causes. This means that even as opportunities and threats might differ, each business at each stage can prosper, stabilise for a while or grow further. Consequently, it is necessary that the entrepreneur is aware of the challenges and opportunities at each stage and know what can be done to address the challenges and seize the opportunities.
Elements of a business growth plan: There are five important elements of a business growth plan. These are the specific goals to be achieved, the timeframe over which a desired growth is to be achieved, the resources to be provided, the specific actions to be taken to ensure that set targets are achieved from one stage to another and the assignment of officers and units to specific duties to be discharged.
Types of growths: The growth pathway to be taken by a business will depend on the personal dispositions, preferences and capacities of the entrepreneur and managers as well as the opportunities and constraints in the environment, the resources available to and for deployment by the business, etc. Regardless of these factors though, you could grow your business along the following broad possibilities:
• Organic – Where the business reinvests its internally available resources to achieve more through capacity expansion. This is sometimes called internal growth.
• Strategic – This is a long-term growth approach through which specific initiatives are carried out to, for instance, gain share in a market that was hitherto unconsidered and therefore untapped.
• Partnerships – This is a pathway to growth through which a business partners/merges with or acquires other(s) to create more market opportunities.
The type of business growth pathway to be taken is a critical issue that should not be taken lightly.
Growth strategies: There are various growth strategies that an entrepreneur could adopt for their business. These include:
• Improving efficiency: One of the first pathways to growth we should always look to is the enhancement of our productivity and efficiency in everything we do. Cutting out wastes and getting more done with existing resources can achieve growth mileage for us.
• Market penetration: Market penetration is about creating further growth in the same market. This means we should strive to sell more of our product in the same market. There are two possibilities here: Selling more to the same customers or getting new customers that are either not taken or away from your competitors!
• New product development: This is about creating new products to generate more revenue. This is one of the most difficult and risky ways of achieving growth but could also be the most rewarding if you get things right.
• Market expansions: To achieve growth through market expansions, you try to reach new markets with your existing products. It could, for instance, be through geographic expansions.
• Integrations: Vertical integration is a growth strategy through which you take control of more stages of your sourcing, production and distribution. This could mean you begin to produce your packages, which you probably used to buy from suppliers. Horizontal integration, on the other hand involves the acquisition of other companies or assets in the same business line. That means, for instance, if you are producing soaps, you acquire another company that is producing soaps as well.
Today we have defined what business growth planning is, its importance, business growth trajectory, elements of growth planning, types of growths and growth strategies. We will conclude this series next week by taking up how to develop a growth plan.
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