Servers & Systems: The Right Compute
RobertChecketts

Is your business growth strategy falling into common traps?

Growing a small or medium-sized business (SMB) is typically easier said than done, as growth strategies can be elusive. They're sort of like mirages in the desert; you see one in the distance, but when you get up close, the vision morphs into something entirely different.

SMB growth strategy_blog_shutterstock_288745313 (1).jpgDon't fall into the trap of endlessly chasing growth strategy mirages. Learn from these failures and successes of modern SMBs so you can create a growth strategy that works.

Don't chase every hot market

There's always a hot new market, and it can be tempting to join the fray. It's tempting to think that, based solely on the market's incredible growth rate, capturing even a small share of it could propel your business's growth to the next level. Take internet book-selling companies, for example. Investors pumped money into these operations, inching them toward profitability. They believed more growth and added efficiencies would put them squarely in the black.

Some larger businesses, however, were willing to sell books virtually at cost to gain market share, and the smaller sellers couldn't compete. These small vendors thought they could jump on a trend, but they weren't well-positioned to take advantage of that trend. However, there is still hope for independent booksellers, says Market Watch; they simply need to find a strategy that plays to the strength of their unique offerings.

Red-hot growth markets always attract competitors, but fast growth with no margins is not a growth strategy—it's a recipe for disaster.

Expand what you already do well

Smart companies develop a growth strategy that includes moving into adjacent markets. However, there are many ways this strategy can go wrong. You need to maintain your leverage in the tangibles and intangibles that are already fueling your success. Further, the adjacent area must have barriers to entry that are easy for you to overcome but may pose challenges to other entrants.

One successful example of this is 1-800-Got-Junk's expansion into the moving industry. The popular junk removal company moved into full-service moving with the company You Move Me, which posted $17 million in revenue in its first year. What 1-800-Got-Junk succeeds at in the junk removal and cleanup business nicely translates to the moving industry. It's an extraordinarily customer-centric company, it shows up on time (the guarantee is emblazoned on the side of the company's trucks), it has an efficient online scheduling system, and its staff is friendly.

Those are qualities most moving companies seem to lack. You Move Me brought qualities from its original service to its new service, creating a powerful advantage that legacy companies couldn't easily overcome.

Do more than add new bodies

Common spreadsheet logic would suggest that if 10 salespeople generate $10 million in revenue, then doubling the sales force would result in $20 million in revenue. But this isn't true. Merely giving your sales and marketing teams more muscle mass will not have the desired results.

Adding bodies isn't a growth strategy. If there's a new area you would like to attack, you need to know its potential, how many people and how much training it will require, where people need to be deployed, and what they need to do. Growth is not about increasing input; it comes from increasing throughput.

Don't buy all the railroads on the Monopoly board

Acquisitions can seem like a quick way to achieve growth, but the failure rate is often high. A hidden problem pops up when you flip the acquisition switch: You start spending your time chasing deals rather than focusing on your existing business. By the time you realize acquisitions aren't a panacea, your core business might have degraded beyond repair.

When done right, acquisitions can be successful, even for SMB owners. A strong local brand can acquire weaker players. Bolstered by better management and a better image, the performance of the acquisitions can improve dramatically. However, it's important to remember that making acquisitions is just a part of running your business, not the entirety of it.

Understand scalability

It's easy to become overly impressed by initial results or potential. However, the scalability of your venture is a vital factor. Many web-based companies are successful because they are relatively easy to scale. One mistake business owners make is failing to recognize when everything depends on a small team that can't keep up with growth.

Successful online marketer Robert Coorey made this error with one of his early start-ups. With the boom of YouTube and the rush toward video marketing, he believed there would be huge potential for video production services, so he launched Vippo. After his Vippo's first year, he had generated only $32,000, he said in an interview with Mixergy. That's because every element of his business model depended on his labor. Apart from cloning a low-paid version of himself, there was no way to substantially grow.

The key is to know how much revenue would be generated by every additional investment dollar. If the benefits of new investments in people or tech can be shared with the base business, then the number should be healthy. If you have to recreate a major portion of the base with every increment of growth, your model isn't scalable.

Consider an online business. If an entry-level SMB server can handle traffic generating $100,000 in monthly revenue, a second server should double the amount of traffic you can handle with little or no additional programming, floor space, or IT staff.

Growth is the lifeblood of a healthy business, but it's important to make sure you're pursuing the real thing and not a mirage that only looks like growth from a distance. Follow this advice to make sure you choose a growth strategy that actually grows your business.  

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About the Author

RobertChecketts

Robert has over 25+ years of IT Marketing and Product Management leadership experience spanning country, Regional and WW organizations. Robert is a marketing executive with extensive experience in field marketing, channel marketing and product marketing on a global basis and is driven to deliver SMB’s end-to-end affordable infrastructure that’s secure from the start, optimized for every workload, packaged for many consumption models, ready to scale, and easy to manage.