The law of diminishing returns tells us that cutting costs with your business will have a positive effect, but there comes a point where the ROI begins to diminish. Is your company too focused on cost-cutting as a means to boost revenue and profit?
Cutting back on unnecessary expenses, and re-negotiating costly contracts can have a profound impact on your bottom line, but no amount of cost-cutting can improve profits for the long-term. A sustainable, profitable business must be supported with effective strategies targeted at business growth. Here’s a look at a few optimal times to shift focus toward growth.
Strategic Planning and Budget Allocation
We’re in the fourth quarter of 2015 where many business owners are waist deep in planning for 2016. Strategic planning is the optimal time to shift the business focus toward growth. When planning, we are looking at what we need to do to get where we want to be. This includes identifying the competencies we need to develop in order to achieve growth goals. We also look at how our investments are performing, and at our market opportunities and threats. And yes, we are reviewing our budget to keep control of costs, however, the budgeting process is also the time to ensure we allocate funds toward important business growth drivers.
Identifying Opportunities for Growth
Our next step in shifting focus toward business growth is identifying opportunities for growth. A reasonable business goal might be to increase profits by 20% by year end. In order to accomplish this goal, we need clarification about how we will do this. We need a breakdown of opportunities that take us from the big picture of 20% growth to the macro view of the relevant components that will lead us to accomplish the growth. What opportunities exists for us to grow, — new ventures, business partnerships, or new products or services?
For growth ideas turn to Strategic Business Coach Jackie Nagel and her article 30 Ways for Entrepreneurs to Grow Their Business.
What resources do we need to support the growth opportunities we identify?
When looking at our resources, we’re looking internally and may re-organize for growth by ensuring that our people are positioned where they perform best, and that we are capitalizing on their expertise. We also need to look at our weaknesses and identify opportunities to partner with strategists or experts in areas where we need help.
Right-Sizing The Customer Base
Building strong customer relationships is one of the most important aspects of sustainable business growth, but don’t dismiss the other side of the equation, and that is identifying the right customer. Look at right-sizing when you are defining your market niche. A market niche identifies a market ideally suited for your product or service, and right-sizing takes into consideration your revenue goals.
Here’s an example. Perhaps your target audience is small business owners. Your product or service might meet the needs of a variety of industries (market niche), but the most profitable industries for your business may be accountants or lawyers (right-sizing).
Two tools for help with identifying a profitable market niche are Google Adwords and Google Trends. Google Adwords will show how competitive your niche is and may help you narrow your focus even more, and Google Trends will show you the performance of this market to ensure you establish your business in a market that is growing.
Business growth also stems from increasing your market share, and increasing market share means you’re taking business from your competitors. If you want to gain a competitive edge, you first need to gain an understanding of the strategies and tactics used by your top performing competitors. A tool like Google Alerts can help in two ways. First, it helps with monitoring your own brand, and second, it helps you keep tabs on your competitors.
If you aren’t planning, you’re circling the target. Do you have business growth on your mind? Share your ideas and the tools you use in the comments.