Growth Strategies – How to grow your Business

There comes a time when a business is going to seek opportunities for growth. A company is going to have to grow in order to see longtime success and profits, if not, eventually a competitor will come in and over take them. The world is constantly changing, what clients and customers are going to desire will change and a business is going to have to grow and evolve in order to be successful. There are certainly a lot of reasons to expand a business and several different methods in accomplishing this. The nature of the business will greatly determine the best possible ways in order to grow.

There will always be a target market for any business. There will also be specific reasons as to why a business is targeting a certain market. One way to grow a business is to try to penetrate this existing target market even more. Trying to increase the market share of an already targeted market will assist in a company’s growth that much more. A good way to do this is to examine what your competitors are doing and try to slightly one up them. One method for doing this may be to lower prices. Another method could be to increase marketing efforts within the existing target market (Suttle).

A business may have penetrated a specific target market to capacity and may want to expand the markets being targeted in order to see substantial growth. Competition might also be limiting the amount of growth in the initial targeted market. Expanding into new markets, or expanding the products or services offered is a great way to grow an existing business. Diversifying into new markets, products, or services can be risky because of the overall change in the business, and not knowing the outcome, but it can be a great outlet for significant growth (Suttle).

It is very likely for a business to see a lot of competition, especially being a successful one. One way for a business to take up more of the market place is to acquire existing competition. This way you’ll be able to take up that much more of the market share in your industry. This can be expensive, but also controlling that much more of the market share can lead to that much more in profits (Suttle).

Franchising

Franchising a business is a great way to see considerable growth. According to the International Franchising Association (IFA), franchising is a method for expanding and distributing goods and services through a licensing agreement. Franchisors not only specify the products and services that will be offered by franchisees, but also provide them with an operating system, brand and support.

When franchising a business, there are four main considerations to make before pursuing being a franchisee or franchisor.

  1. Brand Value
  2. Support Franchisor provides franchisee
  3. Franchisee obligations are met to deliver products and services to the brands standards.
  4. The relationship between the franchisor and its franchisees.

In a franchise system, the franchisee is in charge of the day-by-day operations of the franchise location and manages the role of fulfilling the consumer’s need. The owner of the brand itself does not oversee the daily operations, but ensures that the support system is in place to make sure the brand is set up for success in the best way possible.

Per the IFA, Franchising is a contractual relationship between the licensor and the licensee that allows the business owner to use the licensor’s brand and method of doing business to distribute products or services to consumers. With franchising a business there will be fees associated with it. The franchisee will normally pay an initial upfront fee and also have some form of royalty payment that will need to be paid to the brand owner.

Listed below are a list of advantages and disadvantages for franchising:

Advantages

  • Offer independence of small business with the support of a large business network.
  • Don’t need extensive business experience. Franchisor provides training and support system.
  • Franchises have a higher rate of success over start-ups.
  • It may be easier to secure financing for a franchise compared to a start-up.
  • Franchises have established, proven brand, with management and work practices already in place.

Disadvantages

  • Formal agreement with franchisor.
  • Agreement determines how you run the business.
  • Restrictions on how and where you operate.
  • Other poor performing franchises can impact your franchise.
  • Continuous sharing of profit with franchisor.

With the fees associated with franchising a brand, there should be a very elaborate support system in place to ensure that the franchisee is successful from the already proven success of the brand being franchised. The franchisor has the expectation that the franchising of the brand is going to enhance the image of the brand that much more, so it is important that the franchisor offer the best systems, tools, and support possible. It is very important when looking to be a franchisee that great support systems are in place. As a franchisor, you want to make sure that you offer the best support systems possible, at the end of the day its going to be your brand that is impacted.

Harvest Strategies

Investopia.com defines a Harvest Strategy as a strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by additional investment would not warrant the expense. A harvest strategy can be implemented when a segment of a business is considered to be taking up too much cash, and it not worth putting more money into. A business may also want to implement a Harvest Strategy to maximize the cash being brought in by a segment of business while only putting as much money into the segment to keep it functioning. Reducing marketing expenses or other expenses can increase the amount of cash being produced from a business segment if that segment if still able to bring in some value.

In any business, products and services have a certain life cycle to them. A business owner may want to implement a Harvest Strategy if a product or service’s life cycle is coming to an end. Once the demand for a product or service starts to diminish, it may be wise for the business owner to reduce the amount of money going into the undesired product or service. Another reason for implementing a Harvest Strategy could be an impending sale of the business. Putting just enough money into the products or services to keep them functioning, while being able to bring as much cash as possible for the business owner knowing that the business is going to be sold to someone else. A business owner may not want to put a lot of money into advertising a product or service, when that advertising is very costly and may only benefit the future owner of the business (Hill).

Sources:

Advantages and Disadvantages of Buying a Franchise. Queensland Government.          Retrieved 22 November 2015.             https://www.business.qld.gov.au/business/starting/business-startup-           options/buying-franchise/advantages-disadvantages-buying-franchise

Harvest Strategy. Investopia. Retrieved 22 November 2015.      http://www.investopedia.com/terms/h/harvest-strategy.asp

Hill, Brian. What is a Harvest Strategy in a Business Plan? Demand Media. Retrieved   22 November 2015. http://yourbusiness.azcentral.com/harvest-strategy-     business-plan-12399.html

Suttle, Rick. Growth Strategies in Business. Retreived 22 November 2015.         http://smallbusiness.chron.com/growth-strategies-business-4510.html

What is a Franchise. IFA.com. International Franchising Association. Retrieved 22       November 2015. http://www.franchise.org/what-is-a-franchise

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