The growth “sweet spot” is the path that optimizes opportunities and achieves profitability quickly – all without exceeding your tolerance for risk. Your job as a business owner is to set a growth goal and to pick the growth path most likely to achieve your goals with the least time, effort, cash and risk.
There are five primary options to consider:
1. Raise price
Grow revenues and profits by raising average price (and thereby revenues) and increasing profit margins. For the typical business, a 10 percent price increase delivers the same profits as doubling the volume of sales at the same price. Consider options for bundling products and services to boost price and customer value, while increasing margins. Are there add-on services (delivery, customization or accessories to your core product) that build in a competitive edge, while delivering more bottom line profit?
2. Sell more to existing customers
Use frequent buyer programs or other incentives to motivate existing customers to buy more or increase the “share of wallet” your company receives. It is easier to sell to existing customers than it is to acquire new ones.
3. Acquire more new customers
Acquiring new customers can be profitable for the long term, but it usually requires increasing your marketing investment. Adding sales people, spending more on marketing, allocating more of your time to prospecting for new clients or generating more referrals are the most common initiatives. According to SunTrust Business Owner Research, the average high-growth business generated $10 in sales for every dollar they invested in sales and marketing. Acquiring new customers can be expensive. Managing cash as growth “fuel” becomes very important for businesses trying to add new customers. Alternatively, cash-strapped organizations might look to word-of-mouth referral programs, which are considered to be the most cost-effective way to generate new customer relationships.
4. Creating New Products and Services
Invest 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 strong customer relationships, nobody, including your competition, is in a better position than you are to identify and meet their needs.
5. Entering 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 small businesses in our survey came from new and different lines of businesses.
About SunTrust Business Owner Research:
SunTrust surveys small business owners and advisors as part of its ongoing business seminars and symposiums. The small business owners attending these events include both SunTrust client and non-client business owners and are representative of the broad spectrum of businesses located in the SunTrust markets. The research cited in this report is extracted from these 5,425 small business owner surveys collected between 2007 and 2011.
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