Grow My Business

Growth Strategies

When choosing a growth strategy, it’s critical to your company’s long-term success to select one that best matches:

• The economic conditions and outlook of both your industry and your footprint – including the competition
• Your specific product or service
• Available cash and financing options
• Key employees’ strengths and weaknesses
• Your company mission and values

The following list summarizes several growth strategies that can either be executed alone or in concert with one another for businesses to seize new opportunities for success.

Take your product or service to a new market.

By bringing your business to a new market area, you can reach a new customer base. However, be choosy about where you go. Start small and use applicable metrics to evaluate your progress. Going too far too fast can burn out your existing staff, available cash and technology systems.

Introduce a new product or service.

If you have a successful product or service set in your market, consider augmenting it with a new one that will add value to existing client relationships and generate new traffic. One caveat: Be careful not to introduce a product or service that will make your core, most successful set obsolete or spur cannibalism under the guise of an ‘upgrade’.

Start a chain or franchise.

If your primary business value proposition can translate into multiple locations or offices, then corporate expansion or opening up business ownership via franchising might be the right thing to do. Before you consider this option, be aware of three things:

1. To be as good as the ‘original’, you must be able to maintain service standards, regardless of whether the growth is corporate or franchise based.
2. Developing multiple sites takes a lot of leg work which means you’ve got to plan to have people ‘on the ground’ to make it happen. Operating details - including the most minute ones – as well as a firm communication of the corporate culture and mission, demand complete buy-in to be successful.
3. Any potential franchisees must be willing to adhere to your corporate program and must have the capital to cover the start-up costs. If they don’t, they can dilute your brand and undermine your plans for growth. Remember, franchisees are entrepreneurs too.

License.

If your product - whether tangible or intangible - can be sold through other companies, consider licensing it. While you’ll likely forego a significant amount of profits in doing so, licensing can quickly bring you a strong regional, national, or even international presence. Before you license, however, please consider the following:

1. Patent. At the very least, make sure your product is patent-pending. Doing so will help prevent copy-cat producers from taking away valuable market share.
2. Calculate realistic sales projections. The more you’re able to prove to a prospective licensee that your product or service can really move, the easier it will be to make a deal happen.
3. Select licensees carefully. Look for one that has a strong reputation and is willing to aggressively market your product or service. And don’t be sold solely on royalties. While bigger companies may only offer a fraction of the royalties you might receive from a smaller outfit, the exposure you could generate with the larger business can more than make up for it.

Merge or acquire.

Once you assess your market conditions, the value of your own product or service, and the saturation of competitors in your current footprint, joining forces with another like-company could be your best bet. Mergers and acquisitions open you to new customers, expanded product and service sets, and deliver operational efficiencies. Just be sure you seek out a partner who holds to a similar vision and carries the same values as you do today.

Assess Your Readiness

Before you seriously consider any type of growth plan for your company, ponder the following questions:

1. Are your current operations running smoothly and positioned to handle more activity?
2. Assuming your current infrastructure, can you handle a sudden boost in demand and production?
3. Does your existing staff have the capabilities to support new growth? (Meaning: Do you need to hire more staff, different staff or offer additional training?)
4. Do you have enough capital to invest in growth? (Meaning: Will existing cash flow support the plan or will you need to seek out investors or bank financing options?)
5. As a business owner, are you ready to give up some control or delegate tasks you’ve long considered your own?
6. Have you done your research? (Meaning: Aside from your gut instincts and acumen, do you have measurable statistics to back up your plan?)
7. Do you have an exit-strategy? (Meaning: if current operations and/or the expansion plan fails, do you have a solid plan to cut your losses?)

If you answered “yes” to each of these questions, then you may very well be ready to begin your expansion plan. If not, then you’d be better served consulting with a business development professional or your business banking relationship manager to more appropriately assess your plan – along with the potential risks and benefits – before you make your move. Either way, look before you leap.

How to Finance Growth

When businesses assess and define growth opportunities, one of the most obvious questions to arise is “How can we pay for it?”. Depending on both your current business landscape and specific expansion plans, there are several ways to help finance it.

Use cash from the business.

If your operations are efficient enough to provide ample cash flows and you’ve got excess cash balances, use them. Before you do, however, make sure you’re managing receivables, inventory, and any outstanding debt levels appropriately. Any misstep when you’re dealing with operating cash can spell disaster for your business.

Explore bank financing.

Even when your business income seems sufficient to handle growth opportunities, think twice before spending available funds. There are many cost-effective options available to provide the cash you need to expand. Options include:

• Term Loans: A fixed debt amount and repayment plan. They can be secured by business assets, personal guarantees, and sometimes can be unsecured. This type of financing is most often used to pay for equipment, real estate, and office expansion.
• Lines of Credit: Lines of credit provide a flexible way to inject cash into your business while giving you more control over your monthly cash flow with options. Like term loans, lines of credit are typically secured by business assets and/or personal guarantees.
• Business Home Equity: Many banks offer lending options and flexible payment terms that allow you, as the business owner, to borrow against the equity of your primary residence to fund business growth.

Consider Investors.

Whether private or public – and the fact that you’ll likely share or relinquish a portion of future profits – you may want to consider individual or institutional investors to help your company grow. Whether they’re friends with money to spare or an investment banking firm interested in new opportunities, investors may prove your best options for new cash.

Calculators & Guides

When it comes to making financial decisions for your family or business, it's critical you have the right numbers on which to base them. RBC Bank provides a variety of financial tools and calculators to keep you informed on whatever topic is giant in your life.