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Why every business should have a strategy for growth and how to do it

Written by: Michael Smyth

Article Overview: Celia made great cookies, but she wasn’t making great money. Six years of hard work and she’d virtually cornered the cookie market in her home town. Her new range of corporate cookies (cookies for corporate gifts) had enabled her to capitalize on a new market segment and charge a higher price. But, she was working harder than ever and her dreams of taking long holidays in the sun seemed to be a distant fantasy.

Why every business should have a strategy for growth and how to do it

Celia made great cookies, but she wasn’t making great money. Six years of hard work and she’d virtually cornered the cookie market in her home town. Her new range of corporate cookies (cookies for corporate gifts) had enabled her to capitalize on a new market segment and charge a higher price.

But, she was working harder than ever and her dreams of taking long holidays in the sun seemed to be a distant fantasy.

Celia had hit the ceiling

Celia seemed to be at a dead end again. She had felt like this three years ago when sales had rocketed and she was struggling to keep up with production. To cure this she employed someone to do the production so that she could concentrate on sales. However, within the last few years her sales growth had tapered off – it wasn’t that she was losing sales, but that she wasn’t getting any more.

The business was profitable, but not to the level which would allow Celia to realize her dreams of long holidays in the sun. The new range of corporate cookies had enabled her to increase her prices for that market segment, but there was still a limit on how much people would pay for a cookie.

So, Celia did that maths and worked out how many cookies she would need to sell to reach her profit goals. That was when it dawned on her that not only did she not have enough customers but her pool of potential customers was too small.

The ceiling was caused by geography

The ceiling Celia had hit was caused by the laws of geography. Celia’s hometown had a small population. Even if everyone in her town bought her cookies (which was extremely unlikely anyway) her profits would still be modest because her margins were small.

Celia had a very important decision to make: either stay small (and put up with modest profits) or grow big and realize her dreams.

Celia decided to grow her business

Celia realized the whole purpose of going into business was to give herself freedom to do as she wished. Only increased profits and more time would do that. So, she set about planning the next stage of her business growth. There are a number of options available to her, each with their advantages and disadvantages. She decided to list them on a piece of paper to get a better perspective:

• Option 1 – Open another cookie store: This way she would double her potential market. It would be like starting again but in another place. This time it would be easier but there was still the capital outlay of finding premises and she would need good staff to manage the store for her in her absence. Profits would probably drop before they rose, but in the long term she would be better off;
• Option 2 – Create a franchise system: By creating a franchise system Celia would be giving someone else the right to run a business using her recipes and her brand. This would avoid Celia the capital outlay of finding premises. However, there was quite a bit of work involved writing the manuals for her potential franchisees and at the back of her mind she was worried that her franchisees would not make the cookies like she could. That in turn could damage her brand;
• Option 3 – Find sales agents: The third option was to find sales agents around the country. She felt this option may work for her corporate cookie range. The sales agent would go into businesses and sell regular orders of corporate cookies. Celia would still be responsible for manufacture and delivery, and she would pay the sales agent a commission on sales. This would be very cost effective for her but she would be reliant on the enthusiasm of the sales agent.
• Option 4 – Find distributors: Here she would sell boxes of cookies to retail stores around the country. She could start small with local grocery stores but eventually get into some of the larger supermarkets. She realized though that she needed to build the credibility of her product first and streamline her production if her distribution network was to grow exponentially.
• Option 5 – Sell online: A relatively small investment into an online shop would increase her potential customers exponentially. However, she knew this wasn’t the magic bullet. Having an online store was not enough. She also needed a strategy for marketing that website and pushing it up the search engine rankings. That would take time and money.

Why not stay small?

Whichever option Celia chose she knew it would involve more investment – both in time and money. There would need to be watertight agreements set up with franchisees, agents, distributors or web developers. It almost felt like she was starting all over again and she hated that feeling. However, if that investment was made properly the rewards could be great. She realized she had gone into business for a reason – to give herself freedom. To realize that dream she needed to take the next step.

For the first six years of her business she had wandered aimlessly without a vision and she could attribute many of the mistakes made in those first six years to that one failure. All of a sudden she got clarity and purpose. By identifying her strategy for growth she realized that she really wanted to develop the corporate cookie idea and expand that concept through sales agents. The margins were higher and she had a niche in the market. In hindsight she wished she had created a strategy for growth at the beginning of her entrepreneurial journey. That way, she wouldn’t have that feeling of starting all over again and could have saved a lot of time.

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Article Tags: corporate cookies, corporate gifts, dreams, market segment, money



Related Forum Posts
Re: Mobile Marketing - Indeed mobile marketing is one of the high rollers in the online marketing business. Nevertheless if we want growth for our business an application of this strategy is advantageous.
Strategy People - Greetings all! Recently I have come to the understanding that I am severely lacking strategy. I have many, many tactics on how to make money with my business but without a strategy to implement those tactics I'm spinning my wheels. Has anyone found someone who is a great strategist for their business? There are lots of 'readable' resources around but like more entrepreneurs, I'm too busy thinking of ways to make money for my business rather than learning strategy. So, for me the best thing is to find someone who can help guide my business in strategic planning. Someone who can supplement my strengths with their own. As an extra question, is this a common trait amung entrepreneurs? How many here are good at strategy? If you learned to be good, how did you learn?
Growing ... or not - I've seen this done successful and I've seen disastrous results. From the expansions I've seen, a lot depends on the business owner and/or manager. Some people can run a business if it stays on an even keel, but many are simply not qualified to handle a business "explosion". Its wonderful to have the opportunity to grow your business in a hurry, but if the people or person in charge can't handle the growth, it can be really ugly and can cause huge problems within the business. Having the right people in place to deal with the growth is a key to making it work for you and not against you. Shri
Growth? - when we say "Grow" are we talking about growth in scale or growth in their bottom line. I feel when business owners talk about money their main concern is to have their current customer buy in more frequency and thus improving their bottom line i.e through referrals, joint-ventures etc. growth in scale can be scary due to the amount of risk and effort required to undertake it. Not to mention the owners also being concerned about being in more than one place at once as they haven't in most cases systematized their businesses.
Need Help Growing? - One resource that I've found to be extremely helpful was calling the Business Development Bank of Canada (BDC). I've met a lot of top business owners who have used the BDC for various reasons (i.e. sales/marketing strategy, training, foreign development, etc) and all say it was a massive help. The BDC will usually help you create the strategy using industry specific consultants and then not only help you fund the consultant's work but also the strategy. Their loan terms are little higher than banks but they’re a lot more easy going and understanding than regular banks.


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