As soon as a business a business secures their first few customers they immediately turn their attention to growing. All businesses should strive to grow but many are unsuccessful in their growth plans and this ultimately leads to their business failing.
There are five common business mistakes that prevent a business from growing.
1. They Haven’t Planned Properly For Growth.
Your business plan should be the key driver in all of your growth planning. It contains your revenue expectations, marketing plan and sales plan.
Your business plan should help you understand exactly what you need to do operationally to grow. Targets will be set for your marketing campaigns, sales conversions and spending. It is also very important to set targets for specific metrics that will help you understand your business and measure the success of your growth plans.
Below are some of the key performance indicators KPIs you should set targets for in your business plan then review performance against.
- Customer Acquisition Cost (CAC)
- Average Customer Spend
- Customer Retention %
- Attrition Rate %
- Referral Rate
- Sales Revenue
- Gross Margin%
- Net Margin %
- Overhead to Revenue %
- Variable Cost %
2. They Do Not Understand Their Business Enough To Grow
Some business owners do not understand their business and how it is performing to grow successfully. You cannot grow a business sustainably unless your business model is sound and your operations efficient. For example, if your customer growth rate is 10%, but you have a customer attrition rate of 20%.
To grow you need to find why you are losing so many customers and solve this problem first. Once this issue has been rectified it; you can then try to grow your customers.
3. They Lack Funding
Sometimes all a business requires to grow is a cash injection to purchase extra stock or pay for a specific marketing campaign.
Here, you need to find the best funding source for your business.
If you have an excellent trading history, a bank loan or overdraft facility is a good option. Banks are more likely to lend to you if you are established and know specifically what you want to do with the money.
If you do not, then you will have to find an alternative source of funding. Your main options for funding are discussed here.
4. They Don’t Have The Expertise Internally
This is very important, firstly you need the correct staff to enable you to identify the opportunities for growth. This could mean you need to employ someone with a specific skill set, alternatively, you can employ someone you can delegate your day-to-day activities to while you handle the strategic planning of the business.
5. Chosen the wrong growth strategy
There are 3 ways to grow your business.
- Getting more customers
- Increasing the number of transactions per customer
- Increasing the value of each transaction
Choosing the correct growth strategy is crucial to your actual plan. You have to be sure what type of growth you are looking for.
There are many available to business, the important thing is to choose one that fits your business and is sustainable.
The most popular growth strategies businesses choose are:
- Open up a new location
- Entry into a new market
- New sales channels
- Developing new products/services
- Amplification of marketing
- Price changes
- Partnerships & Strategic Alliances
- Mergers & Acquisitions
- Franchising their business model
- Licencing your product / increasing sales channels
Growing a business sustainably is difficult. The key to success is business analysis, planning and performance management. The first step is to understand your business, target market and competitors.
Using this knowledge find a suitable growth strategy that matches your business competencies, ambition and funding. Review performance against your growth plan regularly and do not be too stubborn to pivot and change the direction of the business.