Business owners know a lot about how their businesses run today. However, it can be hard to accurately forecast and predict resources needed to generate new sales, new customers and new products. Optimistic by nature, entrepreneurs tend to underestimate how expensive it will be to acquire the skills, customers and products necessary to achieve growth.
SunTrust Business Owner Research finds existing customers are the primary sources of revenue rowth for small businesses, but other sources also contribute significantly.
The Four Sources of Revenue Growth
Where did your revenue growth come from last year?
Penetration: Selling more of your current products to existing customers. Called “increasing share of wallet,” because you are growing the dollars available from current customers. It is four times easier to sell to existing customers than it is to acquire new ones.
Acquisition: Promoting existing products to new customers. Acquiring new customers can be expensive, because it generally requires adding sales people and spending money on marketing. The average high-growth business in our survey generated $10 in sales for every dollar they invested in sales and marketing. Social marketing tools and word-of-mouth eferral programs can be low-cost ways of fueling acquisition of new customers.
Missionary Selling: Marketing new products to new markets. This means growing by opening a new location or entering a completely new line of business. Many entrepreneurs start their own businesses to create new and better ways of doing business. It is no surprise that 18 percent of the growth generated by the small businesses in our survey came from new and different lines of businesses.
Cross Selling: Selling new products to existing customers. This means investing in new products and services that address the unmet needs of your existing customers. Market leaders are constantly talking to their customers to identify new or unmet needs and are finding cost-effective ways to meet those needs through product line extensions, product acquisition, sales representation rights or partnerships with other companies. If you have a strong relationship with your customers, nobody — including the competition — is in a better position to identify and understand their unmet needs than you are.