Although there are many different ways to grow your business, fundamentally everything fits into 4 key options. This section provides a framework to examine each of these 4 key options and helps you sort through your ideas.
2. Options for growing your business
These 4 key options are:
- sell more of your current product or service to your current customers
- develop a new product or service
- sell your current product or service to a new market
- develop a new product or service and sell it into an entirely new market
This helpful framework, known as the Ansoff Matrix or Product/Market Expansion Grid, is a good guide to help you sort through your ideas.
Each of these options requires different strategies and actions, as well as different skills and resources. Consider the risks as well as the benefits associated with each alternative before deciding which route is the most appropriate to grow your business.
It can be useful to revisit your SWOT and PESTLE analysis when considering your options for growing the business. This enables you to tease out some of the issues you may need to address.
See our 'What are you selling guide' on what it is that makes you stand out - your Unique Selling Point (USP).
Use this pathway to growth template (MS word 18kb) to help you consider the various options available to you to grow your business.
3. Market penetration
The easiest and least risky way to grow your business is to sell more of your existing products or services to your current customers, or people like them.
The way to do this could be by promoting your business more widely so that you reach more of your target audience, and offering a special price or promotion to encourage them to buy.
Alternatively you could introduce a loyalty scheme to current customers to encourage them to buy more or to buy more frequently.
This option offers opportunities to work in partnership with complementary businesses. Collaboration and working in partnership has been covered in earlier guides.
4. Product development
The second option is to develop a new product or service and sell it to your current customers.
Whilst developing new products and services is risky, the advantage in this situation is that you already know your customers. You know what motivates them and the sort of products and services they may want.
During the new product development process, you can consult with your current customers and tailor your new product or service to match their requirements as closely as possible.
It is also very much easier and more cost-effective to go back to satisfied customers and sell them something new, than it is to find completely new customers.
In this situation, a plumber who targets people who want a new kitchen or bathroom may offer a tiling service. Or a specialist delicatessen may introduce a range of chutneys to complement their cheese and cold meats.
5. Market development
The third option for growing your business is to sell your current product or service to a new market.
This may mean that you target a new geographical area and, for example, open a new shop or salon in a different town. Or you could use a different channel to get to your customers, for example, if you currently sell from a shop, you may decide to also sell online on your own website.
You may consider exporting to gain access to new markets and a larger pool of customers. Whilst this is high risk and can take some considerable time, there is also potential for a high return.
Before embarking on this option, you need to thoroughly research how different markets work, as well as undertake a detailed assessment of what the market wants and the suitability of your products and services. A wide range of specialist advice, support and funding to prepare and plan for export is available from International Trade Support on the Business Wales website.
Another option to expand your market is to consider franchising your business. Franchising is a way to multiply your business and extend into new markets. You give a licence to another business owner which allows them to trade as their own business under your brand name following your proven business model.
Franchising is increasing in popularity and can be applied across a wide range of different types of businesses. It is not, however, a cheap or ‘quick fix’ option. You need to be able to show potential franchisees that the business is successful and that the business model and systems are in place to enable them to run it themselves. It needs to be a business that is transferable and can run in multiple locations using the same business model, system, brand and quality.
Detailed information about franchising is available from The British Franchise Association or ask your Business Wales business adviser or bank for advice if this is an option you are considering.
Diversification is the highest risk strategy for growing your business. It can help your business weather tough times by providing alternative sources of income if your original market dries up, stops growing or is hit by competition.
Diversification has proved to be an effective strategy for many farmers who, as their traditional business declines have looked for new and different options, for example, developing holiday-cottages or leisure facilities such as mountain biking or even golf courses.
If you operate your business from home, take care when considering diversifying the business as it may have an impact on aspects of your home life as well as on the business. You also have to be realistic about your exit or succession plans, for example you may need to consider whether the business can be run from a different premises, or whether you are prepared to move home so the business can continue from the current premises.