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Business plans are recognized decision-making tools which contain a formal statement of goals, an action plan and a road map to success. A business development plan is necessary to move key initiatives from strategy to performance. The plan can and should be utilized in all types of companies, circumstances, and functions.
Business expansion can be optimized by crafting an actionable optimum business development plan.
Congratulations! Your business has attained the goals that you initially strove to achieve and is considered a success. As an entrepreneur, small or midsize business, you have proven your ability to meet challenges and find solutions. Pursuing business growth is your next most exciting challenge.
Growth makes business sense for:
Setting a course for business expansion is seldom easy. Developing a professional business development plan with an actionable expansion strategy is an essential tool to optimize business success. Business expansions typically fall under two categories: Intensive Growth Strategies and Integrative Growth Strategies.
The least risky growth strategy for any business is to simply sell more of its current products to its current customers. This strategy is perfected by consumer goods companies. Think 6-pack, 12-pack, 24-pack boxes and different size bottles of Coke or Pepsi.
This growth strategy is based on selling more of your current product to an adjacent market. Offering your product or service to customers in another city or state are key examples. Franchising is a recognized tool for market development.
This growth strategy involves pursuing customers in a different way, such as selling your products online. When Apple added its retail division, it adopted an alternative channel strategy.
Growth is also achieved by developing new products to sell to your existing and potential customers. Nike mastered product development with products like its Air Jordan basketball shoes.
Sometimes, market conditions dictate that you must create new products for new customers, as Polaris, the recreational vehicle manufacturer discovered. For years, the company produced only snowmobiles. Then, after several mild winters, the company was in dire straits. Fortunately, it developed a wildly successful series of four-wheel all-terrain vehicles, opening up an entirely new market.
These acquisition strategies can run parallel to intensive growth strategies or as a sole focus of business expansion. There are three key forms of acquisitions:
This growth strategy involves buying a competing business. Employing this strategy adds to your company’s growth and eliminates another barrier to future growth—namely, a real or potential competitor. Many breakthrough companies such as Paychex, the payroll processing company, and Intuit, the maker of personal and small business tax and accounting software, acquired key competitors over the years. These acquisitions served as both a shortcut to product development and a way to increase their market share.
A backward integrative growth strategy involves buying a supplier in order to better control your supply chain. This strategy can help you to develop new products faster and potentially, at a lower cost. Fastenal, a company that sells nuts and bolts, made the decision to acquire several tool and die makers as a way to introduce custom-part manufacturing capabilities to its clients.
Acquisitions can also be focused on buying component companies that are part of your distribution chain. For instance, if you were a garment manufacturer, you could begin buying retail stores to push your product at the expense of your competition.
Numerous advantages are garnered through business expansion:
Business growth can give your business the advantage it needs to be a leader in a market niche. You can move into new geographic markets, acquire more customers, or provide additional service to your present customers – perhaps, a service they have been asking you for. Growing your brand brings value to your business and quality to your customers. Both are important in creating goodwill in the marketplace.
Attracting and retaining top-notch human talent is a key tenet of business success. The excitement of growth offers the potential for career challenges that inspire skilled employees. Growing businesses offer change and the need to acquire new knowledge – something that younger employees seek and the global economy demands.
Landing a major client or contract can give your business the prestige to compel prospective clients to follow. As you expand your presence, financiers will take you more seriously and you will increase your marketplace strength.
The age-old concept in business is economies of scale. This means that bigger businesses achieve lower costs per unit and stretch administration dollars over a larger product line: marketing, professional fees, insurance and banking charges, to name a few. Economy of scale contributes to securing more money for R&D, branding, capacity expansion, employee training and education, investment in new technology and more productivity from employees.
Growing your business also presents business owners with a myriad of issues to address. Growth generates a variety of changes, all of which present different managerial, legal, and financial challenges.
Applying a SWOT analysis is a useful tool to determine where gaps need to be addressed as you prepare to expand. The management team should use the SWOT analysis to evaluate each area of the company. A typical SWOT analysis looks like this:
By acknowledging the risks inherent in business expansions, you can seek out solutions, learn from others who have faced the same challenges, and gain confidence to best move forward with your business expansion strategies. Remember that your employees, suppliers, partners and customers are key constituents who can support and champion your initiative.
Choose your business partners wisely. Bringing on business partners and signing covenants can make an entrepreneur feel like they are losing control and independence. If you can’t grow without taking on a new partner, then the three questions to ask yourself when evaluating a potential partnership’s worth are:
Business growth brings pressures to a system that may not have had the time/experience to gear up for increased production or services. New timings of payables/receivables may create financial strain. Customers may feel underserved. Employees may be uneasy about the changes. The owner(s) and management may not have the right skills. A list of organizational strengths and weaknesses will determine gaps that need to be addressed. As an example, you may need to consider outsourcing, bringing in executive(s) savvy in expansions, or utilizing consultants skilled at leading functional areas through business expansions.
Pushing your existing product into new markets, or new products into existing markets will be unfamiliar and may have unexpected results. Also as you push up against larger competitors, don’t be surprised if they fight back!
Use market research, beta testing and new marketing strategies for global expansions. This tactic may require a superior location, additional sales staffing, different pricing strategies and new/optimized marketing techniques, among others.
There are several factors to consider with global expansion including the following:
A business expansion will involve a significant amount of due diligence by the executive team, legal counsel, finance, and other functional areas. Being prepared with a comprehensive due diligence list, the business expansion process can go smoothly and quickly, serving the best interests of all parties.
Following is a list of key due diligence items to optimize your business development plan:
A business development plan is best prepared by professional business plan writers. This critical document will be prepared for the board, potential partners, bankers and potential investors and the plan design will encompass:
A professional business development plan not only provides a valuable finished product in hand, it provides additional value during the process of research and thinking about your business in a systematic way. The act of professional planning helps you to think through issues thoroughly, study and research when you are unsure of the facts, and look at your ideas critically. It takes time, but avoids costly, perhaps disastrous future mistakes.
If your business has attained success in meeting the goals that were initially sought and you are now considering pursuing business expansion, a top-notch business development plan created by seasoned business plan writers will place you on the right path for future success.
A first-rate business plan can’t guarantee success, but it can go a very long way toward reducing the odds of failure. Professional business expansion plans are essential tools for transitioning key initiatives from strategy to optimum results.
As a distinguished member of the OptimalThinking.com business plan writing team, Brian J. Bertaux, CPA, MBA is a business executive and CPA whose accomplished 25+ year career includes serving private and public companies ranging from $20 million to $2 billion in annual revenue. Brian brings proven experience in moving businesses forward by developing and communicating results oriented business plans. He makes recommendations to best grow revenue and reduce costs, fund initiatives, optimize cash flow and liquidity, turnaround businesses, and maximize shareholder wealth.