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Most businesses want to get bigger. Small business growth doesn’t simply happen overnight, however. Even if you have a specific, well-thought-out business plan, things don’t always go how you might expect. For businesses with a growth mindset, it’s important to focus on the big picture just as much as day-to-day operations. Effective growth strategies may deliver instant returns, but if they aren’t sustainable and repeatable, you’ll be left scrambling for your next big idea. Small business success rates aren’t spectacular in every industry, so it’s important to find stability quickly.
Implementing sustainable business growth strategies for small businesses will help your business enjoy long-term success. Growing the business is one of the hardest things for small business owners to do, and it’s very rarely easy. It takes determination, innovation, and vision, but it’s also a bit easier when you understand what challenges may lie ahead so that you can plan to overcome them.
Key Takeaways:
Most small businesses must grow to survive, but that’s not always easy.
Small business growth comes with many challenges, including access to capital, employee retention, and identifying new opportunities.
Small business growth strategies like taking out loans, advancements in technology, developing new products, and carefully budgeting to manage growth can be effective for long-term success.
Primary Types of Business Growth
What is a long-term business growth strategy? Small business growth happens in different ways, with strategies that aim to leverage particular strengths or take advantage of current business opportunities. They often grow at different paces, too. That said, these are some of common types of business growth strategies ways that entrepreneurs pursue in the long-term.
Increasing Market Penetration
In industries like food or consumer goods, increasing market penetration can be the fastest way to give your business a boost and carve out a larger market share. This sales strategy aims to increase the number of sales within your current market. For instance, if your small business makes a delicious pesto from locally sourced ingredients and sells it at local groceries and general stores, you may attempt to increase market penetration by lowering the price or setting up shop at local farmer’s markets throughout the week.
Lowering prices may sound counterintuitive for small businesses with thin margins, but making your product more cost-competitive will make it more accessible for more customers. As you acquire more customers who would rather pay a little more to support a local company, the price cut will be offset. Local business growth is often the lowest hanging fruit.
Product Development and Innovation
Most small businesses start with a flagship product. But after that product or service gains traction in the market, introducing more products or making advancements with current products is a good way to grow. Microsoft didn’t stop after a single Windows, after all.
Introducing new products gives loyal customers something new to try while potentially appealing to new customers, too. If our pesto company introduces a new tomato pesto, the sudden appearance of a new product on the shelves breathes some new life into your business and gives customers the opportunity to buy more of your products at once. (You might even offer a special two-pack of the original and tomato pesto for a discounted price.)
Of course, launching a new product is expensive, so for some businesses, it may be more cost-effective to improve on their existing flagship product or service. For example, to keep up with consumer trends and appeal to new customers, make your original pesto wholly organic or get it Kosher-certified.
Partnerships and Acquisitions
More established small businesses can grow quickly by collaborating with or acquiring complementary businesses.
Partnerships introduce businesses to one another’s customer bases, which can be an effective marketing strategy. For instance, our pesto company partners with a local fresh pasta shop to serve delicious pesto pasta at the town fair. Not only could both businesses earn some revenue by selling at the fair, but it would also give both brands good exposure.
Acquisitions are more costly and can typically only be done by more established businesses. In this growth strategy, one company purchases another, gaining control of its operations. Companies acquire startups and other small businesses for many reasons, from wanting to remove a competitor to accessing a new customer base to rolling the acquired company’s products into the parent company’s brand. If our pesto company does very well, we may acquire a local tomato sauce company and rebrand it as our own. Not only are we acquiring the tomato sauce company’s customers to increase our market penetration, but we’re also diversifying our product line.
Market Development
Small businesses don’t have the same resources as national competitors. Sometimes, though, it pays to be small. Although it’s difficult to compete at scale, small businesses have an advantage in market development by being able to target very specific audiences. Similar to market penetration, market development is a growth strategy that aims to capture a brand new audience that you didn’t have before.
We brushed up against this idea in the market penetration section. Individual markets can be divided into subsets based on factors like demographic characteristics, buying habits, or spending power. No matter where you are, there are always underserved market subsets and small businesses can benefit by identifying and accommodating those subsets.
To expand on the earlier example, when we make our pesto completely organic, we’re now appealing to a very local, potentially underserved community. Health-conscious individuals are likely more willing to pay more for a local, organic pesto than they will for a national brand. It may not be a very large demographic, but owning that demographic can help build a stronger, more loyal customer base for the business.
Common Challenges Faced by Small Businesses and Potential Solutions
No two small businesses are exactly the same, and every business will experience its own unique challenges. You may not know how to prepare your business growth strategy, and you may encounter a flurry of challenges when implementing long-term growth solutions. These are some common challenges that many entrepreneurs will face when trying to grow.
Funding Access
Not all businesses need additional funding to get off the ground. But as the old adage goes, “You have to spend money to make money.” Such is the way of growing a business. Financing is often how businesses grow.
It’s exceedingly difficult to expand a business without access to funding. Your business needs working capital to support existing operations and additional capital to invest in growth activities like acquiring new equipment, digital marketing to new potential customers, and hiring more staff. To do so, many entrepreneurs turn to business loans.
Unfortunately, a recent Goldman Sachs survey found that 77% of small business owners are concerned about their ability to access capital. That’s due in part to a rash of post-pandemic regional bank closures, which small businesses rely on much more than large businesses do. The problem has been compounded by high interest rates, as the U.S. Chamber of Commerce reports that 50% of small businesses have delayed growth plans due to interest rates.
Potential Solution:
Despite bank and credit union closures, there are still many lenders and loan products helping small businesses grow. While new businesses or business owners with bad credit may find it difficult to qualify for partially guaranteed U.S. Small Business Administration (SBA) loans, there are many online lenders and traditional lenders that are still willing to lend to young businesses.
Taking on a high-interest term loan isn’t a great long-term growth solution, but there are indicators that interest rates will drop in 2025 and beyond. Using short-term funding solutions like business credit cards, a business line of credit, or a working capital loan can help businesses get fast access to capital, repay it quickly, and invest in short-term growth while waiting for interest rates to drop to take out a larger loan.
Identifying Growth Goals
There’s no magical spell a business can cast to grow exponentially. Every business has different priorities, different goals, and different strategies for growing a business that may work. Understanding how to develop your small business growth strategies over time is a constant struggle. That’s why it’s crucial to define what success looks like for your business.
Setting realistic goals is vital to help your business grow sustainably. Taking the time to develop Objectives and Key Results (OKRs) that you’d like your business to achieve, as well as key performance indicators (KPIs) to measure progress against those goals, will keep your business on track.
Accurate, achievable goal-setting and tracking is a constant challenge for small businesses. Not only do you need the right tools and technology in place to gauge success, but you also need the personnel, raw materials, and operational capabilities in place to achieve your goals. Not to mention, you need to set the right goals in the first place!
Setting reasonable growth goals comes down to understanding your business’s value proposition and knowing your target audience. The first step to growing is understanding who might buy your product or service and who isn’t buying it already. Ask yourself what makes your business unique and what problems your business solves. This will help you identify existing products or services you can improve upon to make your target customers more loyal or help you hone a strategy to market your product to new audiences or offer new products or services to appeal to a broader customer base.
Whatever your short-term or long-term business goals are, they should reflect a strong understanding of your business’s value proposition and the desires of your target audience.
Potential Solutions:
Identifying growth goals is a consistent challenge. After you’ve successfully met certain benchmarks, you don’t just stop trying to grow. Most small businesses are constantly trying to grow and meet new benchmarks.
Your business plan will always be a lifeline for goal-setting. Not only did you likely lay out specific growth plans when you wrote the business plan in the first place, but it’s a guiding light that reminds you of your business priorities and who your target customers are.
There are many ways to grow a small business, from increasing employee headcount to expanding into new markets to increasing monthly or annual revenue. You may be more focused on specific statistics like improving customer acquisition rates. Your business plan will help inform growth plans because it keeps you focused on your long-term aims rather than short, less sustainable wins like a big sale. Technology like artificial intelligence and other automation tools can also assist with goal-setting.
One good thing to keep in mind is that a 2023 Forbes survey found that 79% of business owners are focused on expanding into new geographical markets. With the growth of local SEO for small businesses and tools like Google business profiles, there may be a lot of untapped opportunity in the towns and cities nearby.
Hiring and Retention
Small businesses represent 99.9% of all American businesses, and they employ 46.4% of private sector employees. Small businesses are enormously important employers in the American economy, but many find it increasingly difficult to hire and retain quality talent. As of the Q2 2024 Small Business Index, more than half of small businesses find it challenging to keep up with employees’ salary expectations or demands. 18% of business owners say that affording employee benefits is the top challenge they face.
Between inflationary pressures and tighter profitability margins than large corporations, small businesses often struggle to find and retain the best talent. Often small businesses have to ask employees to juggle multiple tasks, especially when they’re trying to grow. It’s much less expensive to have an existing employee take on new responsibilities than it is to hire a new employee. However, that can lead to employee burnout or the best talent pursuing more lucrative opportunities elsewhere.
Potential Solutions:
Labor is expensive, but it’s the lifeblood of any business. You need great talent to maximize your business’s potential. Great talent often costs money, but one of the best growth strategies for companies is finding and keeping the best people.
One hiring strategy to pursue when your business is motivated to grow is prioritizing entry-level over senior-level talent. Entry-level talent is less expensive, and young people who are new to the workforce are often eager to learn and grow. They don’t have bad habits or expectations set by working at other companies, and you’ll have the opportunity to get them truly passionate about and loyal to your brand. If your goals are sales-oriented, sometimes quantity works over quality, and hiring three motivated salespeople for the same price as an experienced VP of Sales may offer a greater return on investment (ROI).
Another strategy is to offer great perks like flexible work hours, extended parental leave, employer-covered lunches, and professional development opportunities. Perks are less expensive than comprehensive benefits packages or elevated salaries but still contribute to a total rewards package that may make your small business more appealing to talent. Yes, people want and deserve to be paid a reasonable salary, but if your business is short on budget, perks can make up some of the difference.
Labor costs can also be more effectively managed by taking out a business loan. Term loans provide a lump sum payment that can help cover salaries for new employees while they get ramped up and begin to contribute to business growth. Growth can be inconsistent, so working capital loans or business lines of credit are good solutions to provide short-term funding for payroll and other operating costs when business gets a bit sluggish. Just remember you’ll have to pay these loans back quickly.
Balancing Growth with Quality
Growth often comes with growing pains for small businesses. It’s natural to say yes to every client or accept every retailer that wants to sell your product. But if you can’t maintain the quality of your product or service while offering it to more people, it defeats the purpose. Moreover, if you can’t maintain quality of life for yourself or your employees and wind up working insane hours or cutting corners to meet growth demands, it’s not sustainable.
In today’s market, it’s especially difficult to balance growth with quality due to the impact of inflation on businesses. Yahoo Finance reports that nearly 80% of small business owners say their expenses have increased by 6% or more. That impacts growth significantly as you have to spend more and, often, work more to achieve the same growth. It can be tempting to cut costs by lowering quality in order to maintain those desired growth margins. But that’s a dangerous game because delivering a worse product risks alienating customers and turning them off.
Potential Solutions:
Creating a detailed growth plan can help you effectively budget for the challenges associated with small business growth. Strategic budgeting lays a roadmap for how you’ll adapt to rising costs, and focus on ways to grow revenues rather than cut costs. If you’re concerned about maintaining quality, identify the revenue streams, products, and services that are bringing in the most money and work to amplify them rather than introduce new products or services.
When it comes to goal-setting, consider using the SMART framework. SMART goals are Specific, Measurable, Achievable, Relevant, and Timely. They should be based on best-case outcomes but also achievable and realistic. Quantify goals with contextual points to make it easier to determine success.
A great SMART goal is something like, “Increase revenue of our core pesto product by 20% month-over-month through the end of the year without changing suppliers.
Monitoring and Managing Growth
Similar to balancing quality, many small businesses struggle to manage long-term growth. Sometimes, a business takes off faster than its business leaders can handle, resulting in missing the boat on waves of demand or failing to carve out a firm niche in the market. Rapid periods of growth can very easily be followed by rapid periods of decline.
Long-term small business growth strategies need to be closely monitored and adjusted as time goes along. Planning ahead is great, but you can’t see the future so it’s important to stay flexible.
Potential Solutions:
Creating a long-term growth plan is essential. Setting up regular check-ins for key stakeholders with your plan is even more important. By meeting weekly or monthly to assess progress towards goals, you can figure out what you may need to do to stay on track.
Some of the actions your team may take to support growth strategies include:
Getting more funding, via a loan or line of credit
Investing in technology or tools
Opening new jobs for employees or consultants
Regular meetings hold your stakeholders accountable, keep lines of communication open, and help you adapt quickly to changing conditions in the market and within the business with new initiatives.
Conclusion
Starting a small business is hard. Growing it is even harder. Small business owners face myriad challenges when trying to grow. From limited access to funding to managing expectations, there are many roadblocks and obstacles to overcome. This guide will help you implement strategies to support sustainable long-term growth.
FAQs
What is a good growth rate for a small business? A good growth rate may not be the same across all industries. Generally speaking, however, a good growth rate is 15% – 25% annually. Is there a rise in small businesses? According to U.S. Census Bureau data, the last three years have seen an unprecedented boom in new small businesses. More than 16 million businesses were started between 2022 and 2024. How fast can a small business grow? There’s theoretically no limit to how fast a small business can grow, but businesses that grow too fast may take on more expenses than they can handle long term. Are small businesses struggling in 2024? American small businesses face many challenges in 2024, including inflation, high interest rates, and difficulties with employee retention. The Small Business Optimism Index was 88.5 as of April 2024, the lowest it has been since 2012. Nonetheless, there has been a significant boom in the number of small businesses started in the last three years. How to measure business growth? There are several ways to measure growth, depending on a business’s priorities. Most businesses measure growth by revenue increases over periods of time, however, you may also measure growth by number of sales, number of customers, or any other key performance indicators (KPIs) for your business. How can you grow your business to the next level? There are many ways to grow your small business. Some of the best ways to do so are by increasing your market penetration, developing a new product, improving an existing product, leveraging partnerships or acquisitions, and developing new markets.
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