Many small business entrepreneurs have experienced this scenario: after an early surge of enthusiasm and growth, things appear to stall. Sales are no longer increasing as they once did. Finding the right employees has become a challenge, and the spark that once drove the business forward has begun to fade.
This is a natural phase in any business's lifecycle and an opportunity to expand its strategy by focusing on growth models. In this situation, it might be time to seek fresh perspectives and approaches to reignite your business and propel it to the next level.
Common Challenges and Roadblocks of Small Businesses to Success
Small businesses often need help with several challenges and roadblocks on their path to success. These hurdles can significantly impact their operations and growth potential.
Here are some common challenges faced by small businesses:
Lack of Time: Small business owners often find themselves wearing multiple hats, juggling various responsibilities such as managing operations, finances, marketing, and customer service. This limited time can lead to inefficiencies, burnout, and difficulty focusing on strategic initiatives.
Difficulties Balancing Growth and Quality: As a small business expands, maintaining the quality of products or services can become challenging. Rapid growth might strain resources, impacting the ability to deliver high-quality offerings and customer experiences consistently.
Ineffective Strategy: Developing and implementing a solid business strategy is essential for success. However, small businesses might struggle to formulate clear goals, identify target markets, and adapt to changing market trends. A lack of a well-defined strategy can hinder growth and competitiveness.
Inflation: Fluctuations in prices and rising costs of goods and services can impact small businesses' profitability. Inflationary pressures can lead to reduced profit margins, making it harder to maintain financial stability and invest in growth initiatives.
Declining Economy: Economic downturns and recessions can significantly impact small businesses. Decreased consumer spending, reduced demand, and tightened credit conditions can lead to decreased revenue and financial instability.
Expertise: Small businesses may lack access to specialised skills or expertise in finance, marketing, technology, and legal matters. Limited resources might prevent them from hiring experts, potentially affecting their ability to make informed decisions and compete effectively.
Six Growth Strategies for Small-Business Owners
1. Market Penetration
Market penetration is a highly effective strategy for fostering the growth of small businesses. It encourages proprietors to expand their market share by extensively selling their existing products or introducing new products to captivate a broader customer base. The goal of market penetration is for the business to increase its market presence by enticing new customers within the same market segment or encouraging its existing customer base to make more purchases.
Typically, businesses employ more dynamic promotional tactics to achieve this objective, although the specific methods adopted can vary across different organisations. A business might attain market penetration by:
- Amplifying their promotional campaigns.
- Reducing their pricing to make their offerings more appealing.
- Implementing sales and promotional events to attract new customers.
- Engaging in mergers or acquisitions with competitors operating within the same market.
- Enhancing product features to better resonate with customers.
- Optimising their distribution processes for greater efficiency.
2. Market development
A business owner must have an effective market development strategy to reach new customers while retaining existing ones. It is critical if your product sales have plateaued or you intend to expand your market reach to a new target domain.
While this strategy carries a little more risk than the market penetration growth strategy, it has a better chance of success if the business can increase output without negatively impacting distribution or finances, the market they are entering is similar to the one they are already a success, and their products or services are distinct enough to stand out in the new market.
When implementing market development, a business might:
- Establish distinct segments within its customer base.
- Penetrate foreign markets by expanding its outreach.
- Expand its customer base by delving into previously untapped market segments, such as transitioning from a business-to-consumer (B2C) focus to a business-to-business (B2B) orientation.
3. Product development
A product development strategy can sometimes help your business expand. It involves developing or modifying new products and services to appear innovative and meet customer demands.
A growth plan for product development is just as risky as a market development approach. With this plan, the business will have a more extensive product line from which customers can pick.
You may include the following in your product development strategy:
- Form partnerships with other businesses to introduce supplementary products or expand distribution channels.
- Buy the rights from another business to manufacture and market their product.
- Merge two top-performing products into a singular offering, thereby enhancing value.
A business that seeks to penetrate new markets with new products, services, or other offers will use this growth approach. This is the most complicated because it includes an unproven product in a market where you have no prior experience.
There are two kinds of diversification:
- Related diversification: Related diversification occurs when a business's fresh offerings align with the products they manufacture or are situated within a similar domain. For example, a business producing smartphones might expand into creating smartwatches that seamlessly sync with their existing line of electronic devices.
- Unrelated diversification: On the other hand, unrelated diversification transpires when a business's newfound offerings extend beyond its established competencies. For example, if a business has a longstanding history of crafting gourmet chocolates and then decides to venture into manufacturing electric bicycles, it would exemplify unrelated diversification.
5. Acquisition of Other Businesses
Acquisitions can be part of a business growth strategy. A business acquires another business to expand its activities. A small business could use this strategy to grow its product line and penetrate new markets. A growth plan based on acquisitions can be risky but not as dangerous as a diversification strategy.
One explanation for this is that the products and market are already established. Because of the significant investment required to accomplish an acquisition plan, a business must be clear about its goals.
Here are three examples:
Upstream acquisition: In this situation, a smaller business merges with a larger one to form an entirely new business.
Downstream acquisition: When a single business buys another, the acquired company becomes a part of the purchasing business.
Lateral acquisition: When two businesses of similar size decide to merge to form a bigger business.
Running a small business can offer immense satisfaction. However, achieving success demands to be prepared for the challenges you'll face. Overcoming these challenges requires strategic planning, effective resource management, and adaptability. Small business owners can consider seeking external advice. gigCMO offers businesses guidance and strategies, empowering them with the knowledge and expertise needed to succeed in a competitive market. Contact us today.