Business growth accelerators are not equal. Business growth is directly related in how much invested capital is required to fuel that growth — so long as the other growth accelerators (management, momentum, and marketing) are present.
Types of Business
– New Product/Market Development : investment in the growth of a new product or market generates the best margins as there is limited competition and the market is growing. Hint: creating new demand for a product that did not previously exist requires outstanding innovation capabilities.
– Acquisitions: Used mainly by middle/large sized firms acquisitions can drive top and bottom-line numbers very quickly. However, performance may not be sustainable without great management and momentum.
– Expanding Into Adjacent Markets: Moving into adjacent market expansion requires precise execution skills and organizational flexibility. It will bring very attractive margins.
– Maintaining or Growing Market Share: It takes a lot of capital and great management to make the product and its value distinctive. But, as long as, the market is still growing, margins will remain solid.
– Growing Share In a Stable Market: This type of growth doesn’t always create value. Although investment may be small, competition for share in order to maintain scale is typically intense, and leads to lower margins.
I should mention that the timing of growth opportunities is determined within each industry. Also, it is easier for smaller companies to grow than larger ones.
All businesses must grow to survive in this very competitive marketplace. Choose your type with great care and make sure you have the capital to pull it off.