Just like every other living thing, a business needs to grow if it's going to survive. Stagnation causes a loss in profits, which in turn can cause a downward spiral. To counter inactivity, several types of business growth can be employed to increase profits:
- Penetrating new markets
- Expanding into existing markets
- Expanding product selection
- Acquiring other businesses
No matter if your business is large or small, these five types of business growth are very common, and depending on strategy used, these types of business expansions require different levels of commitment, time and money.
Market penetration is one of the best known and least expensive types of business growth. Penetrating a market simply means expanding your consumer base in an already established market.
For example, say your company sells canned vegetables and there are many other companies in your market who also sell canned vegetables. What you want to do is increase your sales in your already established market. If you research and decide to drop the price of your canned goods, thrifty consumers in your market base will start purchasing more of your commodities. The return of lowering your price is in the larger number of consumers you’re appealing to in your market area.
Market expansion is the second easiest type of business growth. Market expansion simply means bringing your product into a new territory or another demographic. For example, say you’re a specialist in the healthcare field and you work in City A. After you discover that no one offers your particular services yet in City B, you expand your services to cover both cities. This move wisely gains you access to a new demographic where more people will be interested in purchasing your services.
Product expansion is another common growth strategy. Expansion means keeping your base market, but either adding new products or services. Technology is a great example of product expansion. For example, a product-tracker program might expand their services to include bar scanners or apps for smart devices.
One of the riskiest types of business growth is diversification. To diversify, a business must offer new products to new markets. This requires research, a sound growth strategy, and patience. For example, a manufacturer who makes chairs might diversify their market by building bed frames.
Lastly, we come to the final way a business can grow. By acquiring an existing business, a small business can instantly increase their customer base and marketability. However, it’s a calculated risk that must be researched carefully. Often, businesses must take risks in order to increase their market base and bottom line. With careful market strategies, most businesses can thrive using these five types of growth strategies.