When you run a business, it's easy to get caught up in the moment and focus only on the day in front of you. However, to be truly successful, you need to look ahead and plan for growth. Many business owners plan for the next year or two and create a business growth plan that shows exactly when and how revenue will increase.
We'll dive into business growth planning and share strategies for creating a business growth plan that can set you on the path to success.
What is a business growth plan?
A business growth plan outlines where your company will be in the next year or two. Business owners and leaders apply a growth mindset to plan for expansion and revenue growth.
Business growth plans should be created quarterly. At the end of each quarter, companies can see what business goals they achieved and missed during that period. At this point, management can revise business growth plans to reflect current market conditions.
What to include in your business growth plan
A business growth plan focuses specifically on expansion and how to achieve it. Creating a useful plan takes time, but keeping your growth efforts on track will pay off big.
Your growth plan should include the following elements:
- Description of expansion opportunities
- Break down your financial goals by quarter and year
- A marketing plan detailing how to achieve growth
- Financial planning to determine available capital during growth
- Breakdown of company staffing needs and responsibilities
How to write a business growth plan
Creating a successful business growth plan requires some forward thinking and research. Here are some important steps to follow when creating a business growth plan.
1. Think ahead.
The future is always unpredictable. However, by researching your target market, competitors, and your company's past growth, you can plan for future expansion. The Small Business Administration (SBA) features a comprehensive guide to creating a business plan for growth.
2. Consider other growth plans.
Before you start writing, check out the models of successful companies.
3. Discover growth opportunities.
With some homework, you can determine whether expansion opportunities lie in developing new products, adding services, targeting new markets, opening new locations, or going global, to name a few . Once you've identified the best option for growth, incorporate it into your plan.
4. Evaluate your team.
The plan should include evaluating employees and considering staffing requirements to meet growth goals. By evaluating your skills and those of your employees, you can determine how much growth you can make with your current team. You'll also know when to enhance your hiring process and what skill sets to look for in new hires.
5. Find the capital.
Please include detailed information on how the expansion will be funded. Business.gov offers a guide on how to prepare your funding request and connect with your SBA lender.
6. Speak.
Growing your business requires targeted marketing efforts. Be sure to outline how you will effectively market your business to drive growth and how your marketing efforts will evolve as you grow.
7. Ask for help.
Advice from other business owners who have successfully grown can be the ultimate tool when creating a growth plan.
8. Start writing.
Business plan software has streamlined the process of creating a growth plan by providing templates where you can enter information specific to your company and industry. Most software programs are aimed at general business planning. However, you can easily modify these to create a growth-focused plan.
If you don't have business plan software, don't worry. You can create a business growth plan using Microsoft Word, Google Docs, or similar tools. Create the following sections for each growth opportunity.
- What is an opportunity? Is your growth opportunity a new geographic expansion, a new product, or a new customer segment? How do you know there's an opportunity? Include market research to demonstrate the feasibility of your idea.
- What makes this opportunity worthwhile at this time? For example, growth opportunities may include leveraging new technologies, leveraging strategic partnerships, or capitalizing on consumer trends.
- What are the risk factors for this opportunity? Identify the factors that make it difficult to execute on this growth opportunity. For example, challenges may include the state of the overall economy, intense competition, supply chain distribution issues, etc. What are your plans to address these challenges?
- What is your marketing and sales plan? Identify marketing activities and sales processes that will help you seize this growth opportunity. Detail the marketing channels used (social media marketing, print marketing), messages, and promising sales ideas. For example, you can hire sales representatives for new geographic areas or enter into sales agreements with relevant brick-and-mortar or online retailers.
- How much will this growing area cost? For example, if we add a new product, we may need to purchase new manufacturing equipment or raw materials. Marketing costs are obvious, but don't forget to include incremental sales costs such as commissions. Outline economies of scale and where existing operations can make new growth areas cheaper than going it alone.
- What will your income, expenses, and cash flow be? Forecast your income and expenses and create a cash flow statement for new growth areas over the next 3-5 years. Include a break-even analysis, sales forecast, and all expected expenses to see how much your new initiative will increase your revenue. Include how new growth areas will positively (or negatively) impact existing sales. For example, if you sell swimwear, you might sell more swimwear if you decide to grow by adding cover-ups and sunglasses.
After completing this exercise for each growth opportunity:
- Create a summary that considers all growth areas for the period.
- Include summarized financial statements to see the big picture and how it affects your company.
- Evaluate the financing needed to implement your plan, including various options and interest rates.
Why is a business growth plan important?
Here are some of the many reasons why a business growth plan is essential.
- Market share and penetration rate: If market share remains constant in a world where costs consistently increase, you will inevitably start posting losses instead of profits. A business growth plan can help you avoid this scenario.
- Recover early losses: Most businesses lose far more than they earned in their early years. To recoup these losses, the company needs to grow until it generates enough revenue to pay off the debt.
- Minimizing future risks: Growth planning is important even for established companies. These companies can always streamline their sales and increase liquidity. Liquidity comes in handy when you need funds to deal with unforeseen problems.
- Appeal to investors: For most companies, the main purpose of business growth plans is finding investors. Investors want to see an overview of your company's plans to grow sales in the coming months.
- Specific profit plan: Growth plans are customizable for each business and don't have to follow a set template. However, all business growth plans should be focused on revenue. This plan should answer a simple question: “How does your company plan to generate revenue each quarter?”
What factors influence business growth?
Consider the following important factors that can affect the growth of your business.
- leadership: To achieve your goals, you need to know the details of your business processes and how external forces affect them. Without this knowledge, you won't be able to lead or train your team to drive revenue, and you'll experience stagnation instead of growth.
- management: Small business owners are inherently involved in operations, including acquiring funds, resources, and physical and digital infrastructure. Ineffective management can impact your ability to perform these duties and hinder your growth.
- Customer loyalty: Acquiring a new customer can be five times more expensive than retaining an existing one, and a 5% increase in customer retention can increase profits by 25% to 95%. These statistics show that customer loyalty is the basis of business growth.
What are the four major growth strategies?
There are countless business growth strategies, but there are only four main types. These growth strategies will help you decide how to build your brand.
- Market strategy: Market strategy refers to planning how to penetrate your target audience. This strategy is not aimed at entering new markets or creating new products or services to increase market share. It's about leveraging current products. For example, can you adjust your prices? Should we start a new marketing campaign?
- Development strategy: This strategy means considering ways to enter new markets with your product or service. If you're not finding the growth you want in your current market, expanding into new markets may be your goal.
- Product strategy: Also known as “product development,” this strategy focuses on new products and services that can target current markets. How can you grow your business without entering new markets? What do your customers want?
- Diversification strategy: Diversification means expanding both your products and your target market. This strategy is typically best suited to small businesses that have the flexibility to adapt to the products and services they offer and the new markets they are entering.
Max Freedman contributed to this article.
