Business growth is necessary to sustain itself over time

In 2019, for the fourth consecutive year, the number of companies created in Colombia increased. According to the statistics of the Colombian Confederation of Chambers of Commerce (Confecámaras), 309,463 productive units were constituted, with an increase of 2.1% compared to 2018, when 303,027 were born.

This creation figure is encouraging and according to the president of Confecámaras, Julián Domínguez Rivera, it reflects the good economic moment in the country and the growing interest in formalization.

However, not all new companies are guaranteed to stay in the market. According to a recent study by Confecámaras, after 5 years of operation only 34 of the 100 registered firms survive. And the death rate is highest among small businesses.

Consequently, the future of these businesses will depend on their strategies to be bigger. But what does it mean to grow up?

“A company grows when it is able to give back more and more to shareholders, generate more jobs, gain market share and increase sales.” President of the Private Competitiveness Council (CPC), Rosario Córdoba Garcés.

Business growth is not just about increasing sales
According to experts, a protifable growth is the ability of organizations to generate value, therefore, it goes beyond increasing sales and implies providing differentiated offers to customers, generating quality employment, profitability for shareholders and sustainability.

There is a group of companies that have very high growth rates in certain periods of their life. The Organization for Economic Development Cooperation (OECD), to which Colombia belongs, defines high-performance companies as those that achieve year-on-year growth in employment and sales greater than 20% for at least three consecutive years.

“In that definition is the subset of companies called ‘gazelle’ that, being young (five or less years), achieve the same high growth rates,” adds the head of the CPC.

We ask ourselves then, what does it mean to grow?

According to the book Emprendedores en Crecimiento, derived from research carried out in 2015 by the Universidad de los Andes for iNNpulsa and Confecámaras, for a company to grow it is essential:

Change of mind: the manager needs “open mind and ambition to look beyond its borders”. This first challenge involves overcoming fears, wanting and believing that you can grow.

Networking: it is also key to be linked to support networks, such as the programs designed by the Chambers of Commerce of various cities to boost growth. Valle E and Valle Impacta, from the Cali Chamber of Commerce, and Crecer es Posible, from the Medellín Chamber of Commerce for Antioquia, are an example of these initiatives to promote the growth of entrepreneurs and businessmen, but there are also calls for entities such as iNNpulsa or non-governmental organizations such as Endeavor.

Relevant and sustainable strategy: business growth implies having a clear, solid and long-term business strategy that includes options if any of the tactics used does not give the expected result on time. According to experts, to take a leap in business, companies must also be highly productive and efficient, have a viable financial strategy and hire highly skilled human capital.

Use of new technologies: according to Córdoba, they must also use frontier technologies – renewable energy, biodegradable plastics, artificial intelligence and electric vehicles, among others -, know customers deeply and adapt quickly to the reality of the market.

You may be interested in reading: How to increase sales? Data analysis is the key

5 strategies to boost business growth

1. Design a business model that is scalable

To grow, it is essential to have a business model that can be replicated in other cities or in other business segments, in such a way that once the effectiveness has been proven in a certain place or with a particular customer niche, another can be reached. geographic market without having to make major adjustments. Digital applications and franchises, for example, are a sample of this type of strategy. If your knowledge and presence are essential in the business model, it will not be so easy to grow when opportunities arise unless you dedicate yourself to transferring knowledge to the work team and create a system that allows the standardization of production processes and customer service .

2. Focus on solving the need for massive audiences

This refers to choosing a market that offers a significant size because if the focus is on micro-niches it will be difficult to scalar the business. In these cases, growth would be generated by a high price of the product or service with the risk that this entails.

3. Integrate into powerful supply chains

In this case, it is about becoming a supplier to companies with a presence in different countries or with a very powerful distribution network, such as the D1 or Justo & Bueno type ‘hard discount’ chains, which will drive growth based on their own growth. . In these models, the risk is not having enough funds to leverage this accelerated growth that can be generated in a short time.

4. Have a high-performance management team

Although you must have high-level employees, it is key to set up boards of directors with people who have experience in internationalization and can contribute their ideas and knowledge to the company’s expansion plan. If the board does not already have this experience, it is feasible to have at least one mentor with the ability to guide growth strategies.

5. Incorporate innovation into the DNA of the organization

In the 4.0 economy, innovation is the key to overcome challenges, expand borders and meet customer needs. From day zero of the company, it is essential that innovation is on the table and allows creating effective communication networks with customers to detect changes in their preferences that can provide new business opportunities. The best source of information to innovate is your customers, so it is with them that you must dialogue on a daily basis to establish the next challenge.

Business growth is necessary to sustain a business over time. This growth exceeds the fact of selling more and implies that you incorporate innovation in your company, that you integrate into wide-ranging supply chains or that you focus on solving the needs of mass audiences.

It is imperative that when economic times get tough, small businesses are flexible enough to adapt to shrinking markets and shifting consumer preferences.

Small businesses in retreating industries face a real challenge. In recent years, there has been a negative shift in sales growth for many traditional businesses – department stores, bookstores, and newspaper publishing, to name a few.

It’s tempting to blame e-commerce competition alone for the decline in popularity of traditional brick-and-mortar stores. While that is a factor, there are other issues affecting struggling industries that have also contributed to their decline.

Some of the reasons for this regression are:
Dependence on trends and consumer spending: For many companies that sell discretionary (non-essential) products, sales depend on consumer spending. If your products are not considered essential, consumers can abstain or buy less expensive alternatives during tough economic times. Trends and fashions are also behind the demand for discretionary items and can even give a business an old-fashioned appearance. This is a common challenge for department stores.

Inability to implement economies of scale: fixed merchandise prices make it difficult for retailers to maintain sufficient margins, as they do not have the necessary volume to develop economies of scale. For example, maximum prices are set by publishers (in the traditional model), so bookstores must rely on higher volume or lower discounts to maintain profitable growth. Fierce competition from Amazon, whose prices can be set through individual book sellers, has resulted in increasingly unstable growth.

Speed in technological innovation: Demand for certain products can also be driven by technological innovation. To survive in a highly competitive market, companies must constantly develop new items and functionalities. For example, the demand for print advertising dropped substantially with the advent of Facebook and Google Ads. Newspaper publishers have lost an important source of income and have struggled to make a dent in the online advertising space.
Rise of Automation: The usability improvements and cost savings that businesses can achieve by automating certain tasks has led to a decline in demand for many human-provided services. Businesses and individuals that provide these services, such as travel agencies, language translation, accounting, secretarial, employment agencies, customer service, postal services, and even agriculture feel the impact of this process as demand shifts towards a service. faster and more efficient.

In these difficult times, some brands have disappeared and others have emerged willing to meet the challenge. Those who survive pay close attention to the market, are flexible, and implement creative solutions to keep up with changing demand.

In times that demand more flexibility, being small has its advantages. Lower costs can help small companies fill the gaps left by larger competitors that have cut back or exited the market. Smaller companies tend to be more agile, able to adapt more quickly to market conditions and implement new ideas with less negative impact. Most importantly, you know your customers better than anyone. A small business owner is much more likely to be in personal, day-to-day contact with his clients than a large corporation owner.

That said, adapting to changing times, digitally or traditionally, requires creativity. By combining the opportunities explained below with the advantages of being small, you can increase your relevance and stand out in the market.

Offer a unique experience
While many large bookstore chains have faced big drops, small independent bookstores are making a comeback, growing year-over-year since 2015. Why? Because they can provide an experience that Amazon cannot. The smell of a new (or used) book, a unique selection of titles that you can explore and discover on your own, a coffee shop that offers never-before-tested own mixes.

Small businesses, especially retailers, can often provide a type of personal experience not found online or in a chain. Take advantage of what it does to you e unique and make it a key point to create a memorable experience for your customers.

Meet customers where they are
Despite the fact that Nordstrom is a great company, it started as a small family business and considers its customers part of that family. He was an early driver of the discount department store trade with his Rack department, while aggressively developing his online business from the start. Now, your customers can buy your merchandise while browsing Instagram or Pinterest. Barnes & Noble was able to compete with Amazon by offering to deliver its products the same day customers place the order. What do your customers value in a shopping experience? Find out how to sell in your small business and invest your resources accordingly.

Empower your employees
Small local newspapers have not recorded the drop in readership that some large national media have suffered. One reason could be that your employees often live in the same communities in which they work. In this way, your staff often access unique details and information on local, provincial or community issues that national newspapers do not have. Small newspapers also tend to have limited staff resources, so they tend to hire cautiously to avoid the costs of hiring someone new.

Hiring quality employees and training them to access customers without asking for permission is an added value for the consumer as it improves the service and offers personalized content.

Provide better customer service
Have you ever called a company for help, only to feel stuck on the phone for hours with an automated system that doesn’t understand you? It’s not fun. Good automation saves time and resources while facilitating the user experience, but automation that frustrates the customer is often counterproductive.

Providing excellent service can really strengthen customer loyalty and increase the chances of being referred. Prioritizing the customer experience is a great way to demonstrate the value of your company to your customers, differentiate your business from the competition, and attract new customers from companies that offer a less pleasant and less personal experience.

Of course, all of these strategies require proper marketing to truly be an asset to your business; many small businesses are pushed out of the market by larger companies with huge marketing budgets. However, if you take small steps and focus your efforts in the right place, you can go a long way with a relatively small investment.

As mentioned above, an advantage of being small is that it allows you to have a more personal relationship with customers. Talk to them about their consumer experience. Find out how they found out about your business and what they like. This can help determine whether marketing efforts should be directed towards social media or face-to-face contacts and what type of incentives (such as discounts or opportunities) might be attractive to our target audience.

Smart differentiation strategies can help a small business counter declining growth. As competition intensifies, creating strong differentiators and advertising them effectively can help you stay competitive. The above strategies can help not only retain existing customers, but also attract new customers who value atmosphere, service, experience, and personalized attention.

Every company is different, which means that there is an opportunity to highlight your distinctive qualities and catch the attention of consumers. Whether it’s the location, the employees, the type of customers or the service provided, it has its benefits to hone and emphasize your best qualities, personalize your customer experience and fight declining growth with authenticity.

Businesses can grow in several ways: maintaining sales and reducing costs (increased profitability and margins); maintaining costs and growing in income (increase in sales and nominal contribution margin) or with a mix of these factors, to increase the value of the companies and their results.

The retail and mass consumption industries have a lot to say in this regard. On the one hand they have the need to align themselves with the reality of consumers; and on the other they must continue to grow in value. The way forward should combine: Strategy, Government, Execution and Technology oriented to price management and profitability.

In the Retail industry and mass consumption in Chile, a certain immaturity can be seen in the teams and structures, and the need to deepen their capacities is evident. Although it is understood as a natural immaturity characteristic of our market, the way to grow and the competitive advantage will come from those companies that focus on the following aspects:

Have definitions of your pricing strategy to maximize revenue / profitability
Train and form a governance and management team of the pricing process to maximize income / profitability
Optimize prices via Software, to be able to adjust ad hoc to the demand by segments and products
Align regulatory and tax aspects to the model
Generate processes to define, execute, and evaluate prices and profitability day by day
Understand that Price and Profitability Management is the key to being able to grow and maximize value in times of slowdown
Invest in a better understanding of customers, in order to define a price that generates a deeper and fair relationship with them
Globally, all Retailers and mass consumption companies invest millions of dollars in improving their models, equipment, and technology around Price and Profitability Management. An increase in these capacities can impact up to 5% the EBIDTA of a company, with an investment that usually has returns within a year.

Too many companies fail to meet their revenue and profitability growth targets. However, the likelihood of achieving profitable growth is increased when the organization has a clear and clean growth strategy coupled with strong execution within its infrastructure. One without the other hurts the likelihood of success.

Why is growth so elusive? Based on research and experience, there may be two main reasons: An organizational infrastructure that cannot sustain successful execution and an inadequate consideration of opportunities within the core business activity, adjacent, or lack of customer knowledge.

Set clear growth goals (SMART):

S: Specific

M: Measurable

A: Achievable

R: Significant

T: Timely

Setting SMART goals  gives you structure and the ability to monitor your goals and objectives. Exchange your incomplete resolutions, setting SMART goals creates verifiable trajectories towards accurate objectives, with clear steps and an estimate of the ability to achieve your goals.

In corporate life, this type of goal planning is one of the most effective and least used to achieve goals. Clarify the way in which your objectives arose and the criteria that will shape their realization.

Identify the ideal customer

Generating sales is relative. If you are selling to clients whose business need is not sustainable, this represents a zero-sum game for you. If you don’t have the right mechanisms in the right place to prospect your ideal client , it will be difficult for you to maintain growth or even grow.

You have to adopt a business or entrepreneurial attitude that allows you to see beyond the obvious and locate the client that is compatible with your business model. This keeps acquisition costs low and ensures that customer relationships are mutually beneficial, and that objectives are aligned.

Create a dissemination and / or promotion strategy

What is the use of setting my goals and knowing who my ideal customer is if I cannot promote my products or services effectively? It is necessary to understand that a marketing campaign needs to be designed specifically for your ideal client and spread in the exact place where they are. General advertising no longer works, it is necessary to contact only potential prospects in order to start an effective process that takes them by the hand at the moment where they make the decision to purchase your products or services, becoming future clients and promoters. One of the most effective ways to achieve this is through an inbound marketing campaign  led by trained professionals who understand who your company is and your ideal client profile, and thus creating a more effective way to ensure the growth and profitability of your company.

An outline of the different growth strategies that any type of company can develop in general was proposed by Ansoff. This scheme, called by Ansoff as the “ matrix of intensive growth strategies ”, classifies the strategies according to the product offered (current or new) and the market on which it operates (current or new) in four modalities.

THESE MODALITIES ARE:

Market penetration strategy. The possibility of growth is considered through obtaining a greater market share in the products and markets in which the company currently operates. Thus, it consists of increasing participation in the markets in which it operates and with the same commercial format, and there may be three ways to develop this strategy: first, that current customers consume more products and services; second, attracting customers from competitors; and third, attract potential customers who are not currently buying in this commercial format. This strategy can be developed through a internal growth strategy (for example, by increasing the number of own stores) or through external growth (for example, through the purchase or merger of competing companies). For example, the market penetration strategy is the strategy most used by commercial distribution companies. This is because it is the strategy that carries the least risk, since it involves the development of similar commercial formats in the same market, that is, the development of the basic business, about which there is a high level of knowledge.

Market development strategy . This strategy implies looking for new applications for the product that attract other market segments different from the current ones. It can also consist of using complementary distribution channels or marketing the product in other geographic areas. The vending sector is an example of how to develop the market, although the most traditional strategy has consisted in the internationalization of the company, through the development of new geographic markets.

Product development strategy . The company can also launch new products to replace the current ones or develop new models that involve improvements or variations (higher quality, lower price, etc.) on the current ones. A typical example is the appearance of new game consoles such as the WII or the PlayStation 3 that have come to replace the previous models.

Diversification strategy . It occurs when the company simultaneously develops new products and new markets. The diversification of a company responds to the needs of continuing to grow in other markets when the current market is saturated or for strategic reasons. A company can diversify in a related way (in similar companies) or in a conglomerate way (in companies with little relation to each other). A case of diversification in Spain is that of the Nueva Rumasa company, which is acquiring companies from very different sectors.

INTERNATIONALIZATION STRATEGIES

Through this strategy , the company enters other geographic markets with the same commercial format . This strategy presents higher levels of risk the greater the difference between the target market and the source markets in terms of lifestyles, language, cultural environment, legal requirements, per capita income, etc.

IN THIS SENSE, WE CAN SPEAK OF TWO LEVELS OF INTERNATIONALIZATION:

First, entry into markets with a high socio-cultural and legal affinity.

Second, entry into markets where affinity is low.

In the case of Spain, the first level markets would be made up mainly of the European Union and Latin American countries, and the second level markets, the countries of the rest of the world.

THIS INTERNATIONALIZATION STRATEGY CAN BE CARRIED OUT IN THREE WAYS:

Making a direct investment (creation of own establishments or purchase of a local commercial distribution company).

Carrying out a joint-venture (creation of a new company with the association of a local company that provides market knowledge).

Export of the commercial format through the franchise formula.

One of the problems that internationalization entails is the ability of the company to face the regulations and laws of the country in question , but there is also one that can become fundamental, the repatriation of profits, since not all countries that They welcome foreign investment, they encourage profits to leave the country and, if they do, they carry very high taxes. For example, in the case of Brazil, the investments of a company there are welcome, but there are a number of innumerable taxes and legal and administrative obstacles that make it difficult to repatriate the investor’s profits.

The tax aspects therefore are a factor to consider when a company decides to make an internationalization strategy and to this end, it is important to analyze in detail the existing double taxation agreements. Another relevant factor is that the exchange policy, since it can play against the interests of the company and that it also entails important commissions every time the currency is changed.