6 Small Business Growth Strategies
- Increase demand through strategic partnerships.
- Improve your profit by removing unprofitable products and services.
- Boost revenue by improving your conversion rate.
- Increase sales by creating a sales funnel.
- Fortify your workforce with new recruiting tactics.
- Shore up market share with a customer relationship management system.
Small businesses don’t necessarily grow all at once and if you’re just starting a business it can be hard to see growth in its very early stages. Just like we use many measures to show a person’s growth—in height, weight, age, and accomplishments—we evaluate business growth using a variety of factors too. Similarly, small business growth can be measured with a whole host of metrics.
From external factors, like customer demand and sales trends, to internal measures like financial records, employee headcount, and company culture, there are many ways to measure small business growth. And each of these measurements will provide a unique snapshot of one aspect of your business. Together, these business growth indicators provide a composite view of how your company is doing, and where it’s projected to go.
We’ve compiled a guide to the ins and outs of the six best small business growth strategies and the indicators to look at to measure your small business growth too.
What Is Small Business Growth?
First, the basics: What is small business growth, exactly? Beyond the general concept of expansion, there’s no solid, objective answer to this. Because small business growth is such a broad concept, it’s hard to land on an exact business growth definition. For this very reason, most of the industry will actually look to numbers to define small business growth.
Those numbers can serve as an indicator of growth, hence why they’re called growth indicators. The lack of an exact definition of small business growth is why business growth indicators are so important: You’ll only really be able to know whether or not your small business is growing if you look to the concrete numbers.
Using these business growth indicator numbers can also be useful when setting goals for your business growth strategies as well. Setting specific numeric goals can be a great indicator of how well your business growth strategies are or aren’t working.
If you’ve examined your growth indicators and have decided your business needs to grow, or if you’re just looking to boost your business growth a bit, here are six business growth strategies you can use.
6 Small Business Growth Strategies to Move the Needle
Here are six business growth strategies to try and implement when building out existing business growth strategies or developing growth strategies. Depending on your existing business, you may decide some of these are more important than others. Take a look at them all and decide where your business could best benefit from putting one or two into play. Remember to track your growth indicators before you implement these, and then check in after a set period of time to see how they’re working.
1. Increase Demand Through Strategic Partnerships
Strategic partnerships can really be anything your business needs them to be, from something as minor as another company mentioning yours in a blog post, to something as major as offer an integrated product. Strategic partnerships will open up your small business to your partner’s audience.
You’ve seen other brands do this, so think of the best strategic partnerships you’ve interacted with and apply what worked there to your own business growth strategy. This could be teaming up with a similar company to promote one another’s goods or services to increase brand exposure.
2. Remove Unprofitable Products and Services
Improve your profit by removing unprofitable products and services. Run an analysis of the costs and revenues of each individual product or service your small business offers. If a given product or service isn’t turning a profit, then it’s time to seriously reconsider: You’ll want to either diminish the costs involved in providing this product or service or even stop offering it altogether.
You’ve probably noticed that some of the goods or services you offer severely underperform, but you can definitely also do an analysis to find the worst performing options. Once you do this, don’t be afraid to take those options off the table in an effort to cut costs.
3. Improve Your Conversion Rate
Rev up revenue by improving your conversion rate. Only a portion of the audience that your small business gets in front of every day ends up converting. In other words, only a certain number of people who actually are exposed to your business actually end up reaching the end goal, likely making a purchase or spending money. Calculating the conversion rate can be done simply by taking the number of people who convert and dividing it by the total number of visitors or people who are exposed to your business.
It probably comes as no surprise then that a crucial part of small business growth in revenue is improving your business’s conversion rate. To improve your business’s conversion rate, take to your business website, as it will be the easiest place to measure this stat. You can simply take the total number of visitors to the site and the total number of people who buy, sign up for an email, or meet your goal, and use those two numbers to calculate the conversion rate. Turn to tried-and-true tactics like performing A/B tests and setting up clear, concise call-to-action buttons.
4. Create a Sales Funnel
Increase sales by creating a sales funnel. To grow your business’s sales, we suggest you set up a codified sales funnel. Delineating the steps that each customer has to take before buying your product or service can help you identify drop off and success. With this insight, you’ll be able to see and improve the stages at which most costumers decide not to convert.
By creating a clear funnel your customers will have an idea of where they are in the process of working with you as a business, and you might be able to reduce some confusion and friction around making a sale.
5. Revamp Your Recruiting Tactics
Another one of our business growth strategies is to fortify your workforce with new recruiting tactics. If you’re eager to measure your small business growth based on your number of employees, then it’s time to start getting creative with how you approach recruiting. To ramp up your business’s workforce, you need to harness creative ways to find employees beyond sharing the job descriptions on LinkedIn. Always carry your business card with you, and don’t be afraid to recruit at any given moment.
Remember that this isn’t just about filling seats and getting people through the door though. You want the right people working for you who share your passion for your business and are going to help you with your business growth goals.
6. Improve Customer Relationship Management
Shore up market share with a customer relationship management system. Market share is far from static. And if you’re going to use this stat to measure your small business growth, then you need to make sure you’re maintaining the customer base you already have, even as you grow. Setting up CRM systems will help ensure your hold on your market share, even as you expand beyond your core customer base.
A customer relationship management system can help you stay on top of customer relationships. They can send out birthday emails with discounts, thank you emails for customers who have hit an anniversary with your business, and you can even use it to get feedback from your most loyal customers if you want.
How to Accurately Estimate Growth
Now that we’ve gone over the business growth strategies we should also cover how to measure that growth, which you’ll want to do before and after you implement the strategies so you can track how well they’re working.
That’s where KPIs, or key performance indicators, come into play—they’re specific, measurable values that indicate how well, or poorly, your business is achieving its goals. By honing in on your business’s KPIs, you can more effectively track each quarter, and chart your progress using consistent metrics.
Your business’s KPIs are dependent upon your company’s specific goals, and you should set several KPIs for all aspects of your business—like sales, marketing, and finances. To give you a clearer picture of what we mean, though, here are some common KPI examples:
- Monthly signups
- New accounts created
- Deals finalized by your sales team
- Leads generated
- New customers per month
- Debt-to-equity ratio
- Organic search traffic
Ultimately, your profits and losses alone can’t tell the whole story—keeping track of targets specific to your industry and business helps contextualize your growth.
And don’t base your growth projections on inference alone. If you or someone on your team has accounting experience, this is the perfect time to flex your analyst muscles. Depending on your purposes for evaluating your company’s growth, consulting a professional might be a worthwhile investment. That’s especially true if you’re presenting this information to lenders or potential investors.
6 Small Business Growth Indicators
Tracking KPIs on a monthly and quarterly basis will help you identify where you’re growing, and any areas that need work, in addition to creating a consistent reporting structure. There are many quantifiable indicators of growth worth evaluating, even though they don’t correlate directly to profit and revenue, like social media engagement, website traffic, and search rankings. The most relevant indicators of growth will vary depending on what kind of business you own, so take the time to assess which factors are the most crucial to your success.
Once you establish your growth priorities and KPIs, you’ll be able to apply these general principles to your business and its growth.
The foundational law of “supply and demand” is foundational for a reason: Your growth potential depends in large part on how much demand there is for your business—whether that’s a service, product, or experience. Assessing your business’s demand is crucial if you’re thinking about expanding your business, or making a hiring plan.
Here are four key indicators of business growth for demand:
Your customer base is loyal—and growing. If you focus on serving your clientele, you know what your customers expect, and can anticipate what they’ll want next. As a result, you’ve cultivated a dedicated, diverse customer base that is loyal to your business, and vocal about their support.
Not quite there yet with your customers? One way to boost customer engagement is to include clients or customers in your business strategy planning. Try creating opportunities for customers to leave comments and feedback. If you have a brick-and-mortar storefront, you can provide feedback opportunities with written comment cards. Create an online survey—you can even just use Google Forms—and add the links to a user survey to your website, and email signature for salespeople and customer service representatives. You can also record sales and service calls, and provide a voluntary short survey at the end of calls.
Inventory is turning over rapidly. If you literally can’t keep your shelves stocked, it might be time to expand your business—one of the most demonstrable ways to measure your growth is by looking at turnover rate for inventory.
The team is busy. Not selling goods or holding inventory? For demand growth indicators in the service industry, look at how full your bookings are, how busy your salespeople and account managers are, and how much people are working overtime.
You’re attracting outside attention. Whether it’s an investor showing interest, or an enthusiastic customer base begging you to expand your business, listen to the feedback you get from clients, friends, and advisors as an indicator of your popularity.
2. Profit and Losses
“Profit” is your net income after essential expenses, like payroll, equipment, and inventory; and “losses” are the costs that exceed revenue. Obviously, a healthy business needs to have more profits than losses—a business with less of the former and more of the latter runs the risk of untenable debt and, potentially, bankruptcy. To determine your business’s profits and losses, you’ll need to collect a few crucial financial records, including income statements, a cash flow statement, and a balance sheet.
Then, check your margins. Your profit margin is the percent of revenue left over after costs and expenses. The calculation is relatively straightforward, once you collect your income and expenses data. To some extent, the best way to determine a good profit margin for your business is dependent on industry, so your profit margin value is relative to the average for businesses in your location and sector.
When you’re looking for indicators of business growth, calculating your annual revenue growth rate is a good next step once you’ve analyzed your profit and losses. If you’ve been in business for fewer than three years, or are a venture-backed company that hasn’t become profitable yet, cash might be tight or business might vary month to month. Revenue can help indicate growth, even if your profits aren’t increasing right now.
That said, if your revenue is high or steadily increasing, yet profits are stagnant, you can use this opportunity to analyze where you can lower operating costs or losses to bridge the gap.
If your revenue indicates healthy year-over-year growth, but profits aren’t budging, zero in on your expenditure to see if there are any costs you can eliminate to free up more cash to put back in your business.
Revenue and profit usually get all the attention for indicators of business growth, but if you’re tracking success, it’s essential to also evaluate the sales that are driving your revenue.
Your sales team is the frontline of your business, and you have insights into the trends and changes from month to month that will impact revenue. So, it’s worth aligning your company’s KPIs with sales goals. Especially for small business owners hoping to increase sales, it’s important to consistently report on sales performance.
When a sales team has more leads than they can call, or are working exclusively on inbound leads, there’s a good chance the wider market is expanding—and with it, the potential for your business. And if your team is closing more deals than your product and account managers can handle, that might indicate growth potential for your business specifically. Just beware of churn due to over-selling.
With few exceptions, successful revenue models rely on sales—whether it’s subscriptions, services, or products—so booming sale can indicate it’s time to expand in order to accommodate new customers or accounts.
5. Workforce and Network Health
From headcount, to hiring patterns, to vendor relations, your employees and partners determine a large part of your success as a manager and owner. Yes, creating jobs can drain cash, especially if you’re in the early stages of your company. But a growing team indicates that your business demand is high enough to justify adding roles.
It’s a good sign if you’re hiring because you have to. An uptick in hiring is a great indicator of growth, particularly for small businesses, because there is typically limited cash on hand, which restricts hiring flexibility. And often before you start to see major profit increases, you’ll have to start hiring out of necessity—as in, account managers are maxed out, salespeople have more leads than they can keep track of, or you’re filling multiple roles yourself.
Also, excluding issues of productivity or mismatched roles, sometimes the best way to boost your business’s growth is to invest in a much-needed hire. Talk to your team about their bandwidth and needs. Their input can help you identify which aspects of your business are the most in need of extra hands.
People want to work for you. An engaged, active workforce will drive productivity and create a great culture. Dedicated employees who get your mission and share your values can help take you to the next level of success.
6. Market Share
Depending on your industry and geographical location, your portion of the local market could be an additional key indicator of how much your company has grown, and how much growth potential there is in the existing market.
Observe peer companies of a similar size, or better yet, direct competitors. If it’s relevant, check your competitors’ recent updates, keeping an eye out for new locations, products, or partner integrations—try checking a company’s blog if you need somewhere to start.
A healthy competitive market will actually help your business grow, so you want to see activity in the space outside of your own business. In the case of small businesses, this indicates demand in the market for the good or service you provide.
Next, try to figure out how big the potential market is, and whether or not that base of potential customers is growing. For many industries, you can find independent reports from analytics companies like Gartner, as well as free market research guides and resources. If you have more business than you can accommodate, too many sales leads to handle, and competitors in your space, there is a good chance the market for your business is strong—and growing.
The Bottom Line
A comprehensive assessment of your business, from day-to-day operations to annual revenue, should indicate to you how much your business is growing over time, and help you identify patterns in demand and spending. Demand, profit and revenue, and headcount might indicate growth from a numerical perspective, but true growth is largely a self-fulfilling prophecy. If demand indicates that your customer base is growing, for instance, act accordingly: Put your effort behind cultivating and expanding that following, and making necessary expansions and hires to support that base.
And whatever your financial statements are telling you, try to capitalize on what’s going well, be it quality products or services, a great sales team, or simply an excellent operation—while working on areas that could use improvement. Because one of the most powerful uses of growth analysis is to identify what’s holding you back. Unsuccessful services or products, inefficient spending, or making the wrong hires can be hard to identify in the moment. These factors are all easier to pinpoint when taken into consideration with financial data and your company KPIs.
In short, if you see indicators of business growth, act quickly capitalize on that growth. Look into small business financing to seize opportunities if they present yourself. At the same time, be sure to remove inhibiting factors, like bad hires and unnecessary spending, from its path. Once you’ve done your homework, and developed an idea of how your business is changing and growing, you can draw from countless free tools to help grow your small business.
Keep in mind, growth is also a risk. It’s tempting to see all growth as good growth—and you should celebrate these wins—but, above all, it’s important to stay focused on delivering quality and operating efficiently.