10 recommendations for an organic growth strategy

08 March 2020 Consultancy.com.au

The simplest path to growth is to sell more products or services to existing customers, and increase the customer base. It sounds simple, but organic growth is not always easy to achieve. Three experts at advisory firm RSM share insights in how businesses can successfully craft an organic growth strategy.

The most pressing – and basic – pre-requisite for growth is “to understand why you want it,” says Andy Graham, a Director in the Business Advisory arm of RSM. “When a business owner asks me about growth, I want to drill down and understand what the motivation is for actually wanting that growth in the first place. It might be that they haven’t been getting the returns or value that they want from the existing business, and that might be because of the way that it is configured, or gaps in their offering, or the limited size of their market place.” 

“For me the starting point is to understand what is the motivation for growth, what are they trying to address – and then what is the owners’ risk appetite, because to grow requires you to take on more risk.” 

The business must understand its capabilities from the outset, Graham says. “Capability is really important: it starts with the business looking outside the boundaries and examining the market place, probably in a broader context than the existing environment. Then, it’s about understanding the capabilities of the business’s people to make good, risk-based decisions to ensure the bets they place are risk-managed.”

10 recommendations for organic growthFrom an understanding of the risks should come clarity on expectations, he says. “As an adviser, I want to see a clear growth plan around the expectations and tolerances of return on investment (ROI), and over certain time periods. How long are you prepared to be on a loss-lead? If that period is two years, are you managing expectations that you should come out in year three and break even, and then expect profits in years four and five. I need to see the ROI, the time frame, the risk-management plan and the scenario of how you manage a situation where the growth plan goes wrong.” 

Vision

A business can’t grow without vision – otherwise it is trying to achieve “growth for growth’s sake”, says Andrew Sykes, also a Director in RSM’s Business Advisory wing. “First of all, growth is about having the vision of where you want the business to be in five years’ time, in 10 years’ time, and 20 years’ time. Then, it’s about having a strategy to make that vision achievable – broken down into 12-monthplus actions that are going to help achieve that vision. Then it’s about your tactics – which are what you do every day to follow the strategy. A lot of businesses think they have a vision, and a strategy, but the tactics are missing.” 

The growth strategy is just as important as the employment strategy, the sales strategy, and “all the other strategies that are run day-to-day in the business,” Sykes says. “If you’ve set a growth strategy, you’ve got to focus on it as a goal. The really successful businesses are the ones where the business owner makes space in their day to focus on the growth strategy and how the business’s operation is linking to that.” 

Having a vision for growth must be accompanied by a clear understanding of what will be required to achieve it, says Patrick Flanagan, a Director in the Business Advisory practice. “Say you decide, ‘I want to grow by 40% over the next three years.’ Then you’ve got to drill down to the next level of how you’re going to achieve that: is that going to be driven by product R&D, is it going to be marketing-driven, will it be driven by your business-development people, will it be driven by acquisition? It’s a matter of being very clear on where your gaps are, and what you are missing in your mix to achieve it.” 

Recommendations for an organic growth strategy

Based on their years of experience in advising on growth, the trio of RSM advisors have drafted ten 10 recommendations for businesses seeking to grow their sales and headcount: 

Define your niche
What is your sustainable competitive advantage that differentiates your business, product or service from the competition. Understand the market niche to which you provide superior value. 

Establish, support and deliver your value proposition
What are the things that you provide? Is it service levels, quality, branding, pricing, or all of them? Never let these components slip and always test and re-test how they are progressing. 

Understand your customers
Put in the work to develop a clear picture of the kind of client that buys your product or service. Understand what motivates their decisions to buy, so you can market to different clients.

Become more tech-savvy
In the modern digital age, technology is certainly capable of disrupting business, but it is also giving smaller businesses unprecedented capability to compete, broaden their reach, and flourish. Business owners simply have to understand the scope of new technologies – or at the very least, employ people that do – so that digital tools are used to their optimum efficiency, and cyber security risks are minimised. 

Keep on top of the numbers
The days of getting a handle on your business’ figures once or twice a year, when manually generating accounts and tax returns, are long gone. Technology such as cloud accounting software allows you to maintain financial reports virtually in real-time, so that trends – both good and bad – can be identified quickly, and acted upon. Your accountant, your banker, your business adviser and you should all have an up-to-the-minute picture of how the business is travelling, to give your business maximum flexibility to fix problems, or take advantage of opportunities. 

Get on social media
Social media scares a lot of business owners, but the possibilities it offers in areas such as marketing, customer engagement, brand awareness and customer service are huge, and profound. Turn it to your advantage. 

Product/range expansion
Where you have a market that values your product or service, constantly ask yourself what changes, adaptations, new products or range extensions are possible, to generate more revenue or even better, new revenue sources.

New geographies
If you have customers that like your product or service, there are probably more out there who also would; whether that is interstate or overseas. Expanding into new regions brings a new range of risks and challenges, and must be thoroughly researched and planned, but it can accelerate your growth trajectory significantly.

Openness to funding/investment
At some point, growth plans are likely to require some kind of funding or investment package; the business owner may have to take on commitments, or give up some equity ownership, to move to the next stages of growth. This must be well-understood and planned-for. 

Understanding of the exit strategy
Business owners may understand why they started their business, and why they grew it, but too many lose sight of the end-game of selling, exiting or passing-on their business. You will leave the business at some point, whether voluntarily or otherwise, so it’s best to have your exit strategy clearly defined.


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