UPDATED: Business Growth Strategies in 2021
Summary. Since the onset of the pandemic, businesses have had to change their growth strategies due to the current socio-economic environment. Franchising, affiliates (independent agents), acquisition and human capital are four of the top agile business growth strategies recommended in 2021 and beyond.
Are your marketing and operational strategies running smoothly, and the business is achieving a stable ROI? That’s fantastic! You’ve reached a significant milestone. Now, you may feel it’s the right time to expand your business to elevate business growth, but how – and what – do you need to kick off this journey?
Answer: You have to decide on a business growth strategy that suits your business needs. This article serves as a guide to the best business growth strategies available to you.
Top business growth strategies
In an informative article published on Entrepreneur South Africa, author and franchise consultant Mark Siebert discusses some of the advantages of franchising: capital, speed of growth, ease of supervision, increased profitability and risk reduction. Let’s take a closer look.
Please note: This article is a foundation on which the discussion is based. It has been used as a high-quality resource, and nothing has been copied verbatim. We’ll be focusing on the following five advantages.
Access to enough capital is one of the primary reasons that inhibit SME’s business expansion plans. However, franchising offers entrepreneurs an alternative way of acquiring capital without running the risk of getting into debt.
The benefits stem from the fact that the franchisee (the individual or company that buys into the business) provides the funds needed to open up a branch. It allows the franchisor’s business to develop through other entity’s resources. Furthermore, the franchisee signs the lease and other necessary contracts, so expansion occurs with minimal contingent liability to the franchisor.
Franchising significantly lessens the amount of capital needed to expand with minimal risk. In addition, there is hypothetically no limit to the number of franchisees. So, suppose you have many interested parties. In that case, franchising is a growth method that will expose your product/service to a broad audience quickly, which creates a plethora of marketing opportunities to spread brand awareness, drive quality traffic to your website, and establish your business on social media platforms.
- Speed of growth
For start-ups and SMEs in particular, ousting the competition is one of an entrepreneur’s biggest challenges. You may have a revolutionary product/service that will sell extremely well but to do so; you need to grab a chunk of the market share quickly. Franchising gives a business this much-needed jumpstart because the franchisee does the majority of the work.
Many franchisees working concurrently can give the franchisor the necessary human resources and capital to compete with larger companies. In this way, they can saturate markets before their competitors.
- Ease of supervision
The effectiveness of management can dictate a business’s success. Poor employee management and unclear policies and procedures can derail a business’s growth efforts.
In this regard, franchising is beneficial because the franchisee(s) are responsible for the daily operations of each unit – you don’t have to micromanage at all. The onus is on them to ensure the franchise meets required targets; they are also solely in charge of negotiating and paying staff salaries, so your financial returns won’t be affected.
- Increased profitability
Franchisees are required to take on potentially timeous activities, including site selection, lease negotiation, marketing, and hiring and training of employees. Critical operations such as payroll and accounting are also their responsibility. For these functions to run smoothly, it’s a good idea to speak to a professional HR consultancy that can give you access to all the resources you need.
Therefore, the franchisor can financially leverage a group of self-supported units, meaning that the franchise organisation can increase profitability.
Due to franchising growth strategy infrastructure, a franchisee can generate a higher revenue than a manager of another establishment. Also, they usually have their cost structure and operate the unit more cost-effectively even after considering what needs to be paid to the franchisor.
- Risk reduction
As mentioned above, the inherent nature of franchising reduces a franchisor’s risk. They are in charge of everything from equipment purchasing and maintenance, employee appointment to any working capital needed. In addition, any liability that takes place in the unit is the franchisee’s responsibility, such as employee and/or customer litigation or accidents that happen on the premises.
- The advantages of franchising include capital, speed of growth, ease of supervision, increased profitability and risk reduction
- Franchising offers entrepreneurs an alternative way of acquiring capital without running the risk of getting into debt.
- Franchising gives a business this much-needed jumpstart.
- No micromanagement is required because each franchisee is in charge of their unit.
- A franchisee can generate a higher revenue than a manager of another establishment.
- The intrinsic nature of franchising reduces a franchisor’s risk.
Affiliate strategy (independent agents)
Do you want to earn passive income? It’s possible if you utilise an affiliate marketing growth strategy correctly. So, what is it exactly? Firstly, let’s answer these central questions.
- What is an affiliate?
An affiliate is a person or company licensed by another business to market its products and/or services. Essentially, they help a business spread brand awareness, garner interest from a broader audience and make new sales.
- How do affiliate programmes work?
Affiliate marketing is based on a revenue distribution model, which essentially means that third parties undertake the promotion of products and/or services. The revenue from sales is shared with the affiliate marketer.
An article published by Forbes says that by 2022, “the affiliate marketing industry is forecasted to eclipse the $8 billion (approximately R130 billion) mark, nearly double what it was worth in 2015. Today, affiliate marketing is one of the most effective ways to earn an income online, drive sales and increase brand awareness.”
The author of the article, Amine Rahal, provides a clear breakdown of the typical parties involved in affiliate marketing.
The creator: Otherwise known as the vendor, the creator is a business or brand that offers a product or service and shares revenues with affiliates.
The affiliate: The affiliate, or publisher, is a business entity or individual who advertises the creator’s product or service and receives a share of each sale that they help generate.
The consumer: The consumer is the customer of the creator, who buys their product or service via an affiliate marketing channel.
The power of affiliate marketing stems from the unique distributed networking model. There are a lot of opportunities for lucrative passive income to be generated.
The following are a few key takeaways from how affiliate marketing works, according to Neil Patel.
- You hire affiliates who are paid to bring customers to you.
- You only pay affiliates if visitors to your website convert to customers.
- Each affiliate has its strengths. For example, they may be very adept at content creation, meaning that they can ‘package’ your product/service in a way that reaches a particular audience that would otherwise have not been tapped.
- It’s a beneficial strategy for start-ups because it is generally cost-effective, so if your business is operating on a shoestring budget, this may be the best growth strategy to consider.
It needs to be noted that there are three different payment structures involved. The one chosen is based on vendor and affiliate preferences.
- Per sale
The affiliate is paid a commission for each sale via the affiliate’s custom product link.
- Per lead
The affiliate receives payment for every prospective customer who completes the desired action, such as signing up for a newsletter.
- Per click
The affiliate is paid an agreed-upon amount for every user that they redirect to the vendor’s website.
An acquisition happens when a company purchases most of a company’s shares to gain control of the company. Suppose more than 50% of the stock and other assets are acquired. In that case, the purchasing company has the authority to decide what may happen to the assets without the approval of the acquired company’s shareholders. Interestingly, you’ll find a trend for companies to acquire SMEs more frequently than between large corporate companies.
A properly understood and well-crafted acquisition strategy is ideal for business expansion as well as reinforcing cash flow. Furthermore, it adds significantly to the company’s value offering, which plays a substantial role in reaching a broader audience, generating marketing-qualified leads (MQLs) with a higher probability of converting.
At this point, it’s important to remember that an acquisition strategy should always dovetail a growth strategy of the core business, and don’t let it take over. In other words, the central organic marketing and growth strategies should be running seamlessly before an acquisition is considered.
How can an acquisition strategy enhance organic growth?
- Acquisition to increase market share
In saturated industries, acquiring a business to increase market share can boost organic growth by reaching a broader demographic of prospects. Furthermore, acquiring a larger piece of market share significantly entrenches the business’s position to open up opportunities to increase profitability through economies of scale.
- Acquisition to add products and/or services that are complementary to the current portfolio
The adding of new products and/or services ensures that the parent company can sell more to existing clients and provide opportunities to target potential new, larger audiences. The apparent benefits are an increase in revenue and profits. Still, it’s also an opportunity to create long-lasting strategic relationships with clients, which open up access to previously untapped markets.
- Acquisition for Diversification
History has shown us that even industry titans with successful business models such as Apple, Samsung and Amazon are not immune from taking hits to its core market. Whatever the causal circumstances may have been, it propels the need for asset diversification to strengthen a business, especially during periods of uncertainty such as the current global pandemic that has severely hurt the world’s economy.
It can be deduced that an acquisition strategy should only be considered and implemented if it will clearly enhance and complement the long-term growth trajectory. Ensure that the acquisition is never made to compensate for another failed strategy or as a way to restructure a business model.
The good news is that if acquisitions are conducted correctly, they have enormous potential to accelerate complementary business growth strategies and revenue. The primary reason for acquisition should be to offer more value to potential and existing customers more efficiently.
Human capital strategy
A human capital strategy is the practical application of a sound overarching business strategy that outlines the resources and skills needed for a business to operate effortlessly to achieve established objectives. At its core, it’s based on extensive workforce planning supported by proficient management policies and procedures.
The reality is that without a team with the required skills to implement and execute a business strategy, revenue growth and expansion won’t come to fruition.
How to formulate a human capital growth strategy successfully
- Align your human capital with your goals
Start by revisiting your company identity and company profile which contains the foundations of your business: your vision, mission and values. Ensure that these tenets reflect your business’s objectives.
- Assess and define the processes that contribute to achieving your business goals
Before you go any further, it’s vital that all of your policies and processes are well written and clearly understood.
New processes will likely be implemented during this time, but once you have a solid foundation, decide on whether your core and supporting procedures are as efficient as they can be.
- Identify the key performance indicators (KPIs) used to measure performance
Establishing and refining processes is what the business needs to function. What KPIs are required for each department and employee to help achieve the business’s goals? Assess skills and traits that an employee needs to fulfil the job role.
- Who will fill the critical job roles?
The KPIs are a blueprint that will help you identify which person would be best for the job role. The next step is to start assigning staff to positions and/or begin the recruiting process.
Everything isn’t likely to fall into place straight away, so patience is paramount. It’s going to be a journey, and along the way, you’ll learn critical lessons and methods to improve your human capital strategy. If done correctly, you’ll be well on your way to growing revenue as well as fostering trust and loyalty from your employees. Remember that your staff members are your most important assets, period.
- Affiliate marketing is one of the most effective ways to earn an income online, drive sales and increase brand awareness.
- A well-crafted acquisition strategy is perfect for business expansion as well as reinforcing cash flow and adds significantly to the company’s unique selling proposition (USP).
- Acquisition strategy assists in generating marketing-qualified leads (MQLs) with a higher probability of converting.
- A human capital strategy is needed to implement and execute a business strategy which will in turn drive revenue growth.