Running a thriving business feels incredible. When you’re in the right market, with the right timing and a good dose of traction, you’re unstoppable. Even when your business is in this enviable position, however, its continued success depends on your ability to focus your time and capital in the right places.
4 ways a growing business can grow even faster
Matt Hulett has experience growing businesses from zero to a billion dollars in gross sales. He has also successfully guided multiple poor-performing companies, including Rosetta Stone, RealNetworks and Expedia, to double-digit growth. The author of Unlock, Hulett’s advice about how startups and established businesses alike can increase growth and build resilience is regularly featured in major media outlets.
“A common problem with businesses that are growing quickly is what I call ‘spraying and praying,’ meaning that you are trying to do too much, and so you are not doing very much well,” Hulett said. To avoid this issue, focus on increasing customer lifetime value, exploiting overlooked opportunities, digging into the data and expanding your arsenal. Doing so will help you capture exciting and lucrative opportunities for growth and expansion.
1. Stop dollars going to your competition
“The easiest way to generate more efficient sales for your business is to have your current customers buy more than one product from you,” Hulett said. “Focusing on selling more to the same customer not only allows businesses to generate more revenue from their customers, but also stops dollars going to your competition.”
There are several ways to approach this strategy, including bundling, upselling and cross-selling. Bundling several offerings into a single package is a great way to increase customer lifetime value while providing customers with a real or perceived benefit. It allows businesses to spend more money on customer acquisition because the average order value increases and ensures that competitors don’t get the sale for any of the components of the bundle.
Upselling is getting an existing customer to increase their spend with you by offering either more or an enhanced version of your product. It allows you to expand your sales volume for each customer. Cross-selling is selling complementary products to your existing customer base. You can decide to build them yourself or partner with creators of new products or services that are effective for cross-selling.
2. Exploit overlooked opportunities
It is also important to allocate time and resources to capturing new customers, and there are two main ways of doing this. “You can create a new product in the same market for a different customer, or take the same product with the same customer and sell it in a new market,” Hulett explained.
Ways in which you can think about selling to new customers include geography, segment and channel. Geographic expansion, for example, may be appropriate if you have outgrown an existing market or seen an advantage in another market.
You may also expand your sales through direct sales from a website, a direct sales force and so on, or indirectly expand your channels using a reseller. Examples of resellers include third-party e-commerce websites, an app store, an offline store (e.g., a grocery store or department store) or a value-added reseller (a company that integrates your solution with another set of products and services).
To give yourself the best chance of success, look for small markets that are growing very quickly. Then, select which opportunities you’ll pursue based on your ability to effect change using your existing resources, team and momentum. By expanding into a small but growing niche, you can exploit opportunities that companies already in that market may have overlooked.
4 ways a growing business can grow even faster
3. Dig into the data
The third strategy focuses on digging into the data to make sure that your marketing is driving more customers to your offering in a cost-effective way, especially concerning your customer acquisition cost versus the lifetime value of your customer.
“Understanding the core economic metrics of your lifetime value per customer and your customer acquisition costs is critical,” Hulett said. “Often you can decide not to pursue something based on the customer acquisition cost, meaning that it’s simply too expensive to acquire a customer.”
Experiment with paid and organic (free) ways to grow your traffic and market your product. Paid options range from Google AdWords and Facebook ads to video advertising on streaming TV. It’s likely that some channels will bring new customers at a lower cost than others. Organic options include free traffic from search engines via SEO, word of mouth and public relations, all of which can be experimented with in order to secure new customers quickly Benchmark against existing acquisition costs, then stop if they’re not effective in comparison. You can also take advantage of product-led options, which involve building viral features into your product or service so that customers are referred to your other offerings.
Being too reliant on paid marketing over time can be costly. Ideally, your referrals grow over time, which can reduce your paid marketing costs to zero and allow you to keep more of your profits. Regularly analyzing your data will help you avoid ineffective marketing, unlock new pockets of growth you may have previously overlooked and bolster a strong market position.
4. When the pan is hot, cook!
If you have a growing business that can be bolstered by another business and you can finance it, buying another company might make sense. Acquiring another business can also help you strategically block the competition and lock in customers. “If you need to enter a market quickly or need to add a business to your arsenal to help satisfy more of the market wants and needs, buying a business could be just the right move,” Hulett explained.
Many large businesses use this tactic, but it’s a smart idea for small and mid-size businesses as well. Acquiring more businesses can give your company an advantage; having influence related to the size of the pie you control is important. The bigger you are, the more difficult it is to turn you off.
For example, over a short time frame the travel website Expedia purchased Hotels.com, Hotwire, Classic Vacations and Egencia. That gave Expedia incredible leverage with strong sources of traffic in a relatively short period of time. In particular, it allowed them to compete against Google, which had always been a threat since it can displace them by getting consumers to book directly from their search engine.
It also gave Expedia the advantage of supply. Having more business inventory with hotel, car and air providers allowed Expedia to offer better pricing and maintain more influence over inventory. As a growing business, you can do the same in your market, whatever it is.
Maximize your strategic options
“Fine-tuning these four operating strategies will help you maximize your strategic options,” Hulett said. Your goal should be to use a combination of them to formulate a strong, executable plan.
Take a good look at your business, dig into the data and figure out where you can increase customer lifetime value. Consider whether there are small but rapidly growing markets that you can expand into. Decide if acquiring other companies will help you satisfy your customers’ wants and needs. Think about where you are applying your energy, capital and focus based on your unique advantages, then consider which of these strategies will help you elevate your growing business to even greater success.