As your company matures, expanding your business becomes increasingly complex and requires a more structured approach. This structure is achieved by developing a strategic growth map that aligns with your business model.
A comprehensive growth model must adopt a methodical approach, addressing both internal and external factors while considering your resources and market position. Constructing this model involves integrating a combination of strategies tailored to suit your company's size and capabilities.
Let's discuss what a growth model is, why it's important, and how to create one for your business.
What is a Growth Model in Business?
A growth model in business is a strategic framework that outlines how an organisation plans to expand its operations, increase revenue, and achieve sustainable growth. It encompasses various components and methods that a business uses to attract, retain, and engage customers, which can lead to increased market share and profitability.
Why is the Growth Model Important?
Beyond providing clarity and fostering better decision-making across your team and company, it offers numerous specific benefits:
- Supports Goal Setting, Planning, and Forecasting: It helps set realistic goals, plan effectively, and make accurate forecasts.
- Identifies Effective Customer Acquisition Methods: It highlights which strategies are most effective in generating new customers.
- Guides Resource Investment: It helps prioritise where to allocate resources for the maximum impact and biggest wins.
- Establishes Key Metrics: It identifies essential performance indicators and sets benchmarks for success.
- Deepens Business Understanding: It fosters a deeper comprehension of business operations and growth drivers among all team members.
With a growth model and historical data, you can run more accurate growth simulations and generate detailed forecasts. For example, by adjusting different growth levers—such as enhancing customer acquisition versus retention or comparing the effectiveness of paid search versus organic search—you can identify the strategies that will most significantly impact leads and sales.
Which Growth Model is Best for Your Business?
There are five central business growth strategies that drive your key metrics. Building your model involves a combination of some or all of those strategies and their variations that best suit your company size and abilities.
1. Market Penetration
Market penetration is a fundamental growth strategy embedded in every business model. To grow your business and gain market share in a market with established competitors, you must differentiate yourself. This differentiation could be through unique value propositions, where your product meets market needs better than others.
Alternatively, selling your product at the lowest price—can help establish a customer base. Another approach is market segmentation, where you focus on a specific underserved niche and expand from there.
2. Market Expansion
Another key growth strategy is expanding your product or services into new geographical areas. If your current market is saturated, competition is stiff, or growth is slow, you can enter new cities, states, or countries. This can be done through partnerships with distributors who have established networks or by offering franchise options to entrepreneurs to lower the risk of entering new markets. Understanding your target market and the cultural or psychographic factors influencing decision-making is crucial.
3. Product Expansion
Expanding your product line is another effective growth strategy. Small and medium-sized businesses often employ this method by offering variations of their core product to reach a larger audience. This could involve creating a premium version for the luxury market, a complementary product used alongside the existing one, or other variations linked to your target audience. Expanding your product line broadens your market reach and deepens your relationship with customers by targeting specific market subsegments in a personalised manner.
4. Diversification
Diversification is a riskier growth strategy but can be valuable. It involves introducing a new product to a new market, sometimes unrelated to your core business. This approach requires extensive research and a significant financial commitment to establish a presence. It should be implemented cautiously, as the market response can be unpredictable. Diversification often requires new infrastructure and staffing investments and is typically pursued by mature companies with a solid position in their core market.
5. Acquisition and Merger
Acquisitions and mergers represent sophisticated growth strategies typically pursued by established businesses. These strategies involve either acquiring another company or merging with one to achieve strategic objectives such as market expansion, resource consolidation, or enhanced competitive advantage. While these strategies can yield significant benefits, they are complex and require substantial capital investment.
How Do You Create a Growth Model?
Here’s how you create a business model for your business:
1. Determine Your Goals
Start by outlining your business goals. These should be specific, measurable, achievable, relevant, and time-bound (SMART). Your goals might include increasing market share, expanding markets, developing new products, or improving customer retention.
2. Conduct Market Research
Market research helps you understand your current customer base, as well as potential customers. Segment your market to identify your target audience's demographics, behaviours, needs, and preferences. It can help you identify untapped potential, barriers to success, and opportunities for growth.
2. Assess Your Current Situation
Conduct a SWOT analysis to identify your business's internal strengths and weaknesses, as well as opportunities and threats available. This provides a clear picture of where your business stands and what resources are available for growth.
4. Develop a Value Proposition
Clearly define your value proposition for each growth opportunity. What unique value do you offer that sets you apart from competitors? Your value proposition should address customer pain points and highlight the benefits of your product or service.
5. Choose Your Growth Strategies
As discussed above, there are five central business growth strategies, and your choice will depend highly on your current position and future goals. Building your model involves combining some or all of those strategies and their variations that best suit your company's size and abilities.
6. Develop an Action Plan
Clearly outline each growth strategy you plan to implement, including specific actions, timelines, and responsible parties. Determine the resources needed for each strategy, including budget, personnel, and technology. Identify potential risks for each strategy and develop contingency plans to mitigate them.
7. Monitor and Evaluate
Use key performance indicators (KPIs) to measure the success of your growth strategies. Common KPIs include sales growth, market share, customer acquisition cost, and return on investment (ROI). Review the performance data regularly and use this information to continuously improve your growth model.
Why Do You Need a Playbook to Integrate with Your Growth Model?
Now that you understand the growth model and the steps to creating your own growth model, you need a playbook to ensure that your strategies are implemented consistently and effectively. A Playbook provides a clear, structured roadmap for your team, aligning everyone with your business goals and fostering better decision-making.
gigCMO's Fractional CMO Service leverages a comprehensive growth playbook filled with proven strategies and best practices. This ensures that your growth model is not just theoretical but actionable and impactful. Our approach means that we work closely with your organisation to tailor this playbook to your specific needs, embedding competencies within your team for long-term success. With gigCMO, you gain a competitive edge through structured, consistent, and effective implementation of your growth strategies.
Please contact us today and get a FREE consultation to better understand the suitable options for growing your business.
