It might be time to stop cutting costs and start focusing on growth strategies again.
The law of diminishing returns tells us that cutting costs with your business will have a positive effect, but there comes a point where the return on investment starts to diminish. Is your company too focused on cost-cutting to boost revenue and profit?
Cutting back on unnecessary expenses, and re-negotiating costly contracts can really affect your bottom line, but no amount of cost-cutting can improve profits in the long run. A sustainable, profitable business must be supported with sound small business strategies targeted for growth. Let’s take a look at a few optimal times to shift focus toward growth.
Strategic Planning and Budget Allocation
In the fourth quarter of each year, many business owners are waist deep in planning for the next year. Strategic planning is the optimal time to shift the business focus toward growth. When planning, we are looking at what we need to do in order to get where we want to be. This includes identifying the competencies we need to develop in order to achieve growth goals. We also look at how our investments are performing, and at our market opportunities and threats. And yes, we are reviewing our budget to keep control of costs. However, this process is also the time to ensure we allocate funds toward important business growth drivers.
Identifying Opportunities for Growth
Our next step in shifting focus toward business growth is identifying opportunities for growth. A reasonable business goal might be to increase profits by 20% by year end. In order to accomplish this goal, we need clarification about how to do this. We need a breakdown of opportunities that take us from the big picture of 20% growth to the macro view of the relevant components that will lead us to accomplish the growth. What opportunities exists for us to grow, — new ventures, business partnerships, or new products or services?
When looking at our resources, we’re looking internally and may re-organize for growth by ensuring that our people are positioned where they perform best, and that we are capitalizing on their expertise. We also need to look at our weaknesses and identify opportunities to partner with strategists or experts in areas where we need help.
Right-Sizing The Customer Base
Building strong customer relationships is one of the most important aspects of sustainable business growth, but don’t dismiss the other side of the equation, which is identifying the right customer. Look at right-sizing when you are defining your market niche. A market niche identifies a market ideally suited for your product or service, and right-sizing takes into consideration your revenue goals.
Two tools for help with identifying a profitable market niche are Google Adwords and Google Trends. Google Adwords will show how competitive your niche is and may help you narrow your focus even more, and Google Trends will show you the performance of this market to ensure you establish your business in a market that is growing.
Business growth also stems from increasing your market share, and increasing market share means you’re taking business from your competitors. If you want to gain a competitive edge, you first need to gain an understanding of the small business strategies and tactics used by your top performing competitors. A tool like Google Alerts can help in two ways. First, it helps with monitoring your own brand, and second, it helps you keep tabs on your competitors.
Looking for small business strategies to improve growth? Call Williams and Kunkel CPAs in Flower Mound at 972-446-1040 to learn more about our business advisory services.
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Source: Business 2 Community