As their revenues grow, businesses are looking to invest in future growth. Whether you’re considering new equipment, upgraded facilities or productivity-enhancing technology, you’ll know you’re on the path to a smart decision when you’ve completed these four tasks:
1. Cover all of your time horizons
Many companies effectively sell products and services designed for today’s market needs and invest in R&D for the long term. To foster sustainable growth, however, you’ll also need to consistently develop the next generation of growth drivers, according to the Harvard Business Review.1 In addition to the short term and long term, managing for the medium term is crucial for turning R&D’s ideas into profitable products and services and for keeping pace with shifting market demand. Investing in emerging, high-growth business lines can also help ward off competitors, particularly startups, who may otherwise capture new markets.
2. Prioritize productivity
The slowdown in productivity growth acts as a hidden drag on economic growth, according to The Conference Board.2
Although many businesses assume the slowdown is a natural aftereffect of extraordinary recent growth, research indicates that’s not the case. In fact, investments in human capital and R&D can increase productivity and growth.3 Measuring and rewarding productivity gains can also help.2
3. Zero in on driving expansion
Investing in new products and services can only pay off if they sell well. Now is the time to plan for how you’ll enter new markets and promote new offerings to existing customers. You can start by thoroughly analyzing data to effectively segment customers and identify their needs and propensities. Another strategy is to refocus your sales force to emphasize team—rather than individual—performance.4
4. Determine how you’ll boost value and volume—not just cut costs
Maintaining differentiation is an essential step toward increasing profitability. Companies may want to strive to compete on value rather than price and drive revenue through higher prices or higher volume. This could be a better strategic approach than simply cutting costs.5 Midmarket companies that consistently follow these rules, even in the face of competitive pressures, are more likely to earn superior returns.
Bonus: Consider sustainability
Although some business leaders doubt the value of environmental, social and governance initiatives, evidence is mounting that they can reduce risk, lower costs and create value. A McKinsey study found the value at stake from sustainability issues can be as high as 25 to 70 percent of EBITDA.6 Sustainability can also drive product and process innovation and bolster growth, but only if it’s incorporated into a company’s performance management system.