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In this presentation gain an understanding of key steps in developing a growth strategy to ensure your business is best placed to achieve growth.
Key learning outcomes:
Welcome to today's presentation on Planning for Growth. Today we'll be taking you through the key steps that you could follow to ensure your business is best place to achieve your business growth.
My name is Dianne Brown. I'm a chartered accountant and business advisor with SRJ Walker Wayland, and my passion is education and educating business owners such as yourself on the importance of planning for success and working with you to achieve your growth and profitability goals.
Today I'm going to be taking you through the nine key steps that we follow in any growth strategy.
The first thing you need to do in any growth strategy is look at where your business is now. What's working? What's not working in your business? Where has your business growth come from historically? Has it come from you slightly decreasing your margins, so you're having lower prices, but higher turnover - whether that's through discounts, offerings etc.
Have you increased your margins, which in turn has increased your profitability? Have you increased or revised your credit terms or have you grown your business by releasing new products or services into either your existing market or new markets?
Have a think about where has your growth come from historically?
Have a think about where you think it should come from. More importantly, you need to be considering what the impact is on your cash flows of these past strategies that you might've tried.
In terms of growth, we all know that growth doesn't even equal profit. A growth strategy is simply one component of your profit strategy.
We know that profit doesn't equal cash. What we're looking for is we want sustainable growth that is basically cashflow neutral, and budgeting for that growth is critical.
The first thing we need to do in developing our growth strategy is do a bit of a gap analysis where we need to address nine key issues.
What you want to do is you want to look at rating yourself on the following using a scale of -5 to +5.
You need to be making sure that you are addressing where you are now with respect to all of those key factors. Determine how you're performing by doing that gap analysis.
The second step is to examine your buyer pay behavior by asking questions such as:
Step three is to segment your market. This means gaining clarity on how to position your market approach and how you're going to spend your marketing budget. To do this effectively you need to be specific around the location of your clients, the size of your market, and your pathway to targeting those particular clients.
It amazes me how many businesses don't do this, but survey your clients.
Ask them:
Step five is your competitor analysis. Who are you competitors? Why would customers buy from them? Then benchmark yourself against those competitors? We will touch on this in more detail a little later on.
Conduct a product benefit portfolio analysis. This means looking at all of your key products or services and working out where they are in terms of this scale.
Introduction
If you are introducing a new product, they're in what we call the Wildcats phase. Which means we're not quite sure how the market is yet going to be responding to those, although we should have done some market research and testing to be able to get a fair idea in the first place before we released the product, but we're still in the introduction phase.
Growth / Maturity
The products that are going to be making new money of those that are sitting in the middle quadrant of a graph.
Your growth products are your star products, and those that are at the peak of maturity in the product life cycle will be what we call your cash cows. They're the ones that are currently making you the most money.
Decline
Then you've got those that may be the product cycle might've moved on and you're starting to see a dip in sales, and they have what we call our dog products. We might want to reevaluate the contribution they make to our growth and profitability targets and whether it's actually worthwhile removing or realigning those products or services to make them more attractive to the market.
Step seven means you need to evaluate your pricing strategy. There are five key pricing strategies that we use look at and, most businesses have some sort of combination of the first three.
There are a number of different ways we can go about looking at your growth plan, but it's important that you have examined those.
You need to develop your growth strategy. That means looking at your overall business strategy.
Summarise this in a one page plan. Ensure it fits with your financial model and your overall business strategy.
When we talk about growth, there are four key ways to grow your business. As we go through each four - it gets harder.
The easiest way to grow a business is through what we call a market penetration method. This is simply where you take your existing products and services and you sell more of them into your existing markets.
Your growth strategy is linked to finding ways you can actually do that. How do you reach more clients in your existing market with your existing products?
The second one is what we call market expansion. This is where you take your existing products into new markets. For example, do you have a product that is only currently available domestically that could potentially be exported or sold overseas? If you currently sell through a retail store, can you add on an online store to give you the opportunity to sell your existing products and services new markets?
The third way is product expansion. This is where you have identified a need for a new product or service. You develop your product and release it into your existing markets.
The most difficult way is what we call diversification. This is where you may have your existing customer, product and sales base, but you might come up with a new product that may in some way be linked to what you're already doing, and you're going to release that new product or service into a completely new market.
It is easier to start at market penetration, in terms of basic growth strategies, and work your way down that approach to get quick success.
In terms of maximizing your revenue, the first step in developing a growth plan and the underlying sales process is understanding what your customers currently need.
What currently does (and doesn’t) work for you in terms of meeting that need?
To do this, I'm going to use an analogy from the animal kingdom. I'm going to talk about the lion pride. A lion pride has a lot of different animals that they can choose to hunt. But they worked out long ago that a strategy to hunt the right prey at the right time, will increase their chance of survival.
So, they have a common goal and a common vision, which is simply to hunt and feed, and they needed to do it in the most effective and economic way possible. They didn't want to waste their time chasing little pigs that maybe require a lot more energy for a lot less return.
They figured out quite early on that their most effective method of survival was to focus on their most effective type of prey, which is a separate. So they learned to ignore small prey that distract them and waste their energy. That's crucial to their survival. We can expand that analogy to any organisation.
I've seen a lot of organisations that have clients that aren't appropriate for their organisation. They're either the wrong size or the wrong fit, and they’re not going to generate you profitable levels.
We all know the Pareto 80/20 rule where 80% of your profits might come from 20% of your clients.
What are the key characteristics of those 20% of your clients? We're going to utilise the lion pride approach to identify those clients, which we're going to call our zebras, to ensure that we're targeting our growth activity and our marketing spend in the right areas.
Before we do that, we've firstly got to work out who is our zebra, and who's who in our lion pride.
If you think about a lion pride, that's going to be your team. In a lion pride, you have:
All of those elements work together to achieve their common goal. So we need to figure out who's who in our team to help us find our zebras.
If we're thinking about our zebras, we need to think who are the customers that give us the most return for the least energy.
Our less risky customers are those that pay better. So we want to focus on the key characteristics of our high value customers. What are the similarities between those? How did we get them? Where are they located? How can we reach them? And we want to figure out how we can develop a plan to get more of those particular clients.
You need to be thinking about who, what, and where is your zebra?
At the same time though, you do need to have done a competitor analysis. Consider the following about who are your competitors:
I want you to consider asking yourselves those four key questions.
Why do you know need to know who your current competitors are? Because your customers know them. They're going to know the difference. People are educated consumers in today's market.
They're going to know if Company A is more expensive than you. They're going to know if Company B has a better reputation for after-sales service. They're going to know if your product is better than theirs, so you need to know what can you do about it, and what you can do differently to satisfy any of their unmet needs.
Weighing your business against your competitors
When you do a competitor analysis, the first thing that I like clients to do is to think about why people buy from you in the first place. (refer to table in presentation)
Once you’ve analysed why people buy from you, consider at least three key competitors and rate yourself against them. Rate each of them in the above areas (out of 100).
Use this comparison to identify gaps and work our a strategy. Break this down into actionable items detailing how your going to address those gaps. This can help you ensure that you constantly come out ahead of your competitors.
If we think about growth, why is it that some businesses are better placed than others to achieve growth? They have a plan and worked through a growth analysis. They have the systems and processes in place to check the achievements, or the results of their strategies, and they adapted accordingly. Planning for growth is critical.
What are some common barriers to growth?
I hope that gives you some ideas and how to structure your growth to ensure it's managed, achievable, and cashflow neutral or better.
Today, we spoke about identifying your growth strategies, and pulling them together into a one page plan with allocated responsibilities and action items. We looked at identifying your 'zebras', any barriers to growth that you may have. Ensure you do a full competitor analysis. Finally, make sure to consider the impact on your cashflow of that growth strategy.