The feeling of running a thriving business is amazing. When you’re in the right market, with the right timing and a good dose of traction, you’re unstoppable. Even when your business is in this enviable position, however, its continued success depends on your ability to focus your time and capital in the right places.
Matt Hewlett has experience growing businesses from zero to one billion dollars in gross sales. He has also successfully guided numerous underperforming companies, including Rosetta Stone, RealNetworks and Expedia, to double-digit growth. Unlock author Hulett’s advice on how startups and established businesses can increase growth and build resilience is regularly featured in major media outlets.
“A common problem with fast-growing businesses is what I call ‘spray and pray,’ which means you try to do too much and therefore don’t do very well,” Hewlett said. To avoid this problem, focus on increasing customer lifetime value, exploiting overlooked opportunities, digging into data, and expanding your arsenal. This will help you capture exciting and lucrative opportunities for growth and expansion.
1. Stop dollars going to your competition
“The easiest way to generate more effective sales for your business is to have your current customers buy more than one product from you,” Hewlett said. “Focusing on selling more to the same customer not only allows a business to generate more revenue from its customers, it also stops dollars from going to your competition.”
There are several ways to approach this strategy, including bundling, upselling, and cross-selling. Bundling multiple offerings into one package is a great way to increase customer lifetime value while providing customers with a real or perceived benefit. This allows the business to spend more money on customer acquisition as the average order value increases and ensures that competitors do not get a sale on any of the package components.
Upselling is getting an existing customer to increase their spend with you by offering more or an improved version of your product. This allows you to expand your sales volume for each customer. Cross-selling is selling complementary products to your existing customer base. You can choose to create them yourself or partner with creators of new products or services that are effective for cross-selling.
2. Exploit overlooked opportunities
It’s also important to devote time and resources to attracting new customers, and there are two main ways to do this. “You can create a new product in the same market for a different customer, or you can take the same product with the same customer and sell it in a new market,” Hewlett explained.
Ways you can think about selling to new customers include geography, segment and channel. Geographic expansion, for example, may be appropriate if you have outgrown an existing market or have seen an advantage in another market.
You can also expand your sales through direct sales from a website, direct sales team, etc. or indirectly expand your channels through a distributor. Examples of resellers include third-party e-commerce websites, an app store, an offline store (eg a grocery store or department store), or a value-added reseller (a company that integrates your solution with another set of products and services).
To give yourself the best chance of success, look for small markets that are growing very quickly. Then choose which opportunities to pursue based on your ability to effect change using your existing resources, team and momentum. By expanding into a small but growing niche, you can take advantage of opportunities that companies already in that market may have overlooked.
3. Dig into the data
The third strategy focuses on digging into the data to make sure your marketing is driving more customers to your offering in a cost-effective way, especially in terms of your customer acquisition cost versus your customer lifetime value.
“Understanding the underlying economic metrics of your customer lifetime value and your customer acquisition costs is critical,” Hewlett said. “You can often decide not to pursue something based on cost per customer acquisition, which means it’s just too expensive to acquire a customer.”
Experiment with paid and organic (free) ways to increase traffic and market your product. Paid options range from Google AdWords and Facebook ads to video ads on streaming TV. Some channels are likely to bring in new customers at a lower cost than others. Organic options include free search engine traffic through SEO, word of mouth and public relations, all of which can be experimented with to quickly secure new customers. Compare with existing acquisition costs, then stop if they are not cost effective in comparison. You can also take advantage of product-led options, which involve building viral features into your product or service so that customers are directed to your other offerings.
Over-reliance on paid marketing can be costly over time. Ideally, your referrals grow over time, which can reduce your paid marketing costs to zero and allow you to keep more of your profits. Regularly analyzing your data will help you avoid ineffective marketing, unlock new pockets of growth you may have overlooked before, and cement a strong market position.
4. When the pan is hot, cook!
If you have a growing business that can be supported by another business and you can finance it, buying another company may make sense. Acquiring another business can also help you strategically block competition and lock in customers. “If you need to enter a market quickly or need to add a business to your arsenal to help meet more of the wants and needs of the market, buying a business may be the right move,” Hewlett explained.
Many large businesses use this tactic, but it’s a smart idea for small and medium-sized businesses as well. Acquiring more businesses can give your company an advantage; what matters is the influence associated with the size of the pie you control. The bigger you are, the harder it is to push you away.
For example, in a short period of time, the travel website Expedia bought Hotels.com, Hotwire, Classic Vacations and Egencia. This gave Expedia an incredible advantage with strong traffic sources in a relatively short period of time. In particular, it allowed them to compete with Google, which has always been a threat as it could displace them by getting users to book directly from their search engine.
It also gave Expedia the supply advantage. Having more business inventory with hotel, car and aircraft suppliers has allowed Expedia to offer better prices and maintain greater inventory leverage. As a growing business, you can do the same in your market, whatever it is.
Maximize your strategic options
“Fine-tuning these four operational strategies will help you maximize your strategic opportunities,” Hewlett said. Your goal should be to use a combination of these to formulate a strong, actionable plan.
Take a hard look at your business, dig into the data and see where you can increase customer lifetime value. Consider whether there are small but fast-growing markets you can expand into. Decide whether acquiring other companies will help you meet the wants and needs of your customers. Consider where you apply your energy, capital and focus based on your unique strengths, then consider which of these strategies will help you elevate your growing business to even greater success.