In this part of the series: “How Small and Mid Sized Firms Grow” we will discuss how best to grow: geographically; new lines of business, acquisition and market penetration.
One is not forced to grow, they can stay exactly the way they are and have been. Some companies have the luxury to do this for a relatively long period of time and that may be just time for them but they will typically be in a small niche business that no one will care much about and will not grow. Alternatively, if they are large someone will come along and find a way to capture their market and for that is the immutable law of progress.
One has many alternatives to grow their business. One of the easiest ways to do this is to become a favored supplier to their customers, some of which are growing and will want you to serve them in new locations. Once you have an anchor client in a new geographic location you will likely be able to find new customers to serve. This strategy is one of the least risky ones to pursue as you have likely covered a good portion of your start up costs already. If you don’t have an anchor client you will have to determine the market size, growth potential, level of competition you will be facing, barriers to entry and a host of other factors to see which geographic market will be best to expand into.
Another way to grow is to add a new line of business. The closer allied it is to your core business the easier it will be for you to enter it as you know it and your clients are more ready to accept you as a new supplier. Being closely allied to your existing business does not however mean that is the best line of business to expand into. The growth rate may be low, as might be the margins, profit potential, ease in attracting new workers, etc. It may be better to start with a clean slate and figure out what the best line of business to be in and then determine what you have to do to get into that segment. We have had many clients re-engineer themselves as the opportunities in those segments were far better then what they had become accustomed to, This doesn’t mean this will be easy, without risk, or the best choice, but if you are considering a new line of business do you homework before settling on the “obvious” choice of something you are comfortable with.
The next thing is to expand via being acquired by someone to grow. It often represents the fastest path but if you don’t do your due diligence it can be a costly mistake. If you are a novice at this try to start small and be able to survive if you are wrong.
The fourth strategy (and there are far more options that one can consider) is simply to make a strong penetration of your existing market. This may take some combination of innovation, aggressive pricing, providing incentives and perks to gin up sales, hiring away your competitor’s best employees, etc.
In our next blog we will discuss learning from others to avoid the mistake of the “not invented here syndrome”.
To see all articles in this series please go to http://optimal-mgt.com/blog.
Optimal Management is the premier management consulting company to the staffing industry. We act as mentors to owners and managers to maximize their sales, profits and value of their company. We become an extension of our clients operations and are there for all of their staffing and business needs, from sales, marketing and compensation plans, to finance, M&A, general management and everything in between.