The Types of Business Growth Every Entrepreneur Should Know

Every entrepreneur and business wants to increase revenues and expand their market share. Companies implement different growth strategies to meet these goals. Understanding and applying these strategies in your business can help it experience the strategic growth you have always wanted. Let’s look at common growth strategies entrepreneurs should know about.

Market Penetration

This strategy requires a business to find ways to grow further within its existing market. Doing this entails lowering prices, increasing their marketing efforts, or finding ways to attract more customers. Increasing brand awareness can also be effective when implementing this strategy. With increased market penetration and growth, businesses can acquire more customers and increase revenues. The latter allows them to invest further in business growth.

Market Expansion

Often confused with market penetration, market expansion is expanding within a specific market to reach new customer bases. For example, a paper manufacturer might expand into an existing market by selling to new small businesses that need printer paper.

Acquisitions

Companies can also grow by acquiring or buying other businesses. While many investors do this to expand their market share or absorb their competitors, some do it to get exposure to new markets. It is not uncommon to find investors who embrace this strategy by owning multiple companies in different industries and niches that may seem unrelated.

The parent company then experiences sales and revenue growth from its acquisition. The immediate growth experienced is because the investor is buying into a market instead of starting from scratch and growing organically.

It is vital to understand that investors and family offices like Parabellum Investments who are interested in acquisitions only consider multi-million dollar businesses with proven track records. They want assured growth and returns on investments, so they only seek out already established businesses.

Vertical Integration

Businesses typically rely on others for specific products and services. For example, a video-on-demand business might depend on Amazon for hosting services. However, it might create its own data centers and do everything in-house. This is an example of vertical integration.

With this strategy, businesses produce everything they need for their operations or acquire companies that help them do so. The result is reduced reliance on other businesses. This type of growth is important because it minimizes the chances of external forces and factors, such as other manufacturers, disrupting the primary business operations.

Also read: Which is Key to Business Growth: Client Acquisition or Client Retention?

Diversification

Another common type of growth businesses of different sizes can adopt is diversification. This strategy entails creating different products for different or new markets. It is often compared to market expansion, but it is done with products and services.

Companies that diversify are looking to start making sales in markets they have never sold in before. Once they find areas where they can expand quickly, they seek to dominate it and gain as much market share as possible.

It is critical to mention that diversified companies will typically have ownership stakes in different industries due to the sheer number of products and services they offer.

Business growth and expansions are crucial for a business’s survival. Many entrepreneurs do not realize there are different types of growth depending on what they choose to focus on. Each aligns with specific business goals and the outcomes they are aiming for. Knowing the different types of business growth can help owners know the direction in which they should point their business.