Focus as a Growth Strategy

Long term success

“If you don’t know where you want to go, then it doesn’t matter which path you take”

Lewis Carroll, Alice in Wonderland

A lot has been said and said again about business growth. But somehow, it doesn’t seem enough. Consider the relative growth of revenues in the small and medium enterprise (SME) segment with between 10-250 employees to that of the larger enterprises with more than 250 employees. Data from the Department of Business Innovation and Skills shows that the SME sector generated a 5% revenue CAGR in the 2014-2018 period, compared to a flat 0% revenue CAGR for the larger businesses:

Graph Source: Annual statistical releases, Dept. of Business, Energy and Industrial Strategy Data excludes financial land insurance activities 

Strong profitable growth (in revenues and margins) should normally aid in better returns of invested capital (ROIC). Nowhere is this more critical than in the Small and Medium Enterprise (SME) sector. Whether you are a privately-owned founder-led business or a small/medium cap public listed firm, you invariably have limited capital to deploy or must stringently manage your cost of capital.

Focusing on what your customers actually need, how best to continue to service them after the initial sale and what business models to adopt will help increase revenue and margin growth. Assessing your company’s strategy across these pillars will create a growth mindset:

  1. Assess the interplay of customers and products: Your current customers are the largest source of revenue growth. However, if they are only buying product development, for e.g., and not maintenance services from you, you are leaving opportunity on the table and your competitors are taking a share of your customer’s wallet. Analyse your customer needs and see how you can leverage your current relationships to provide additional products in your portfolio to your customers. Such a critical analysis also reveals opportunities for you to look at new products that are not in your portfolio, that if you had in your possession, your customer would buy from you. This involves developing a new product or service in order to satisfy your customer requirements in areas that you have competence or skills. Entering new product segments is often a rich (if not risky) source of new growth. Finally, assess how you can position your current (or new) products and services to new customers.
  2. Assess the interplay of customer service and experience: Congratulations if you have managed to convince your customer to buy from you – but is the customer satisfied with the product and do you go the extra mile in helping your client be a super satisfied user? The old adage of keeping your customer happy is not a cliché. Do your customers have pleasant experiences every time they interact with your company? Look at every point of interaction with your customer and critically ask the question ‘Have I done everything possible to make my customer’s experience pleasant and hassle-free’? Customer advocacy is unarguably the strongest validation of the benefit you are providing in the market, generates repeat sales and often convinces new customers to buy your offerings.
  3. Assess the interplay of business models and your investment decisions: How you make money is your business model. Do you license your products into perpetuity to your customers in return for a one-time fee or do you sell a service in return for a recurring fee? Do you include after-sales service as a bundled fee upfront or only charge on a pay as you go mode? The choices you make on your business model will impact the level of investments and cash flows. Your business model is intricately tied with your strategy to acquire new customers and service them. Link your business model closely to your customer needs and after-sales support requirements and you will create an entrenched competitive position for yourself.

So back to Alice, then.

Evaluating the interplay of customers, products, customer support and business models is the focus that will allow you to not just evaluate the strengths of your firm, but also inculcate the focus every business needs in the way it makes its investment decisions.

Quite simply, if you don’t know where your growth comes from, then it doesn’t matter where you put your money.

If this resonates with you and wish to get an external perspective on your growth plans, contact Atreya on 07787 277097 or make an enquiry here

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