Business growth strategies for entrepreneurs have many forms and should be outlined in writing for your company’s reference. Consider diversification, product development, market penetration, and acquisitions as options for expansion. When implementing your growth strategies, ensure that you are using reliable data to back up your decisions. Identifying which methods of expansion will best serve your business’s goals is essential to ensuring your success. Listed below are the three most common methods of business growth for entrepreneurs.
Diversification
Diversification as a business growth strategy is an important consideration for entrepreneurs. It can open new, profitable markets. The strategy requires due diligence and research. However, it is important to remember that diversification is not for every business. While diversifying into new markets can lead to greater profits, there are risks as well. In some cases, it is not a good idea to diversify into a new sector.
One important factor to consider when diversifying is size. Diversifying can be hard to do if the core business is large and has a high growth rate. To make a new business profitable, it must grow at a rate that is at least three to four times the core business’s growth rate. A new business that grows at a rate of 250% would have to grow by 2.5 million per year to match the growth of the core business. Another consideration is the endgame. A successful entrepreneur will focus on a variety of markets while still maintaining a single product or service. Diversification is a risky strategy and requires a lot of planning.
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Product development
One of the most successful business growth strategies for entrepreneurs involves product development. Product development helps companies attract new customers while improving their current products and services. As an example, fast-fashion retailer ASOS started off selling clothing and soon added face and body products, as well as a collection of popular brands. By adding new products and services to their offerings, they were able to reach a global audience and expand their market.
The process of product development is often owned by the individual who is leading the company. This person may have to delegate current duties to someone else. Alternatively, a larger organization may want to create a position specifically for the purpose. In either case, product development is an essential part of any business growth strategy. But remember that this strategy can also be a full-time job. And keep in mind that the most effective way to get started is to create an idea for a new product, and then begin researching the best way to make it.
Acquisition
While a successful acquirer will have a low base salary and tie a substantial percentage of their total compensation to annual performance measures, many entrepreneurs do not see the benefits of this strategy. Many successful acquirers use economies of scale to reduce the costs of establishing a multi-tier bureaucratic structure and instead create a flat organization. An example of a successful acquirer is Sara Lee, which uses a decentralized management structure and separates its company into discrete profit centers, each led by an executive with high authority and accountability.
Successful acquirers often create a pipeline of potential target companies to identify those with similar capabilities and business goals. These companies then prepare a gap analysis, which outlines the critical components required to capitalize on new business opportunities. The process of acquisition aligns the strategic vision with the company’s goals. Successful acquirers often keep acquired businesses separate from the rest of their business, which they view as a necessary element of establishing a successful acquisition growth strategy.
Market penetration
One of the best business growth strategies for entrepreneurs is to expand the company’s market. A well-developed market penetration strategy allows a company to reach a larger number of customers and improve its revenue. By identifying opportunities to expand into new markets, a business can increase its promotional and sales efforts and reach a wider audience. This strategy is particularly beneficial for entrepreneurs in the early stage of their business, when it is more costly to gain new customers.
A market penetration strategy is a comprehensive set of activities that are undertaken to increase the company’s share of an existing market. Market penetration strategies often use a community-based and educational approach to achieve this goal. These strategies are dynamic, allowing them to adapt and grow with the changing market. To create a successful market penetration strategy, you must first analyze the market. This will help you understand the size of the market, how many competitors are already in it, and how well your competitors are doing.