Surprisingly, fast business growth may not be about finding flashy new products or new customers, but by selling more of what you already have.
Riddle: Imagine a conversation between four business owners who all want to grow their businesses, but each in a different way. The first has something completely new to sell to a completely new market. The second is going to sell new stuff to the business’s existing customers. The third is going to sell more of what it already sells to its existing customers. And the fourth is going to sell what the business already sells, but to a brand new type of customer. Which growth strategy is easier to execute? Which is most likely to succeed?
Answer: The third strategy is probably best. Get your existing customers to buy more of what you already sell. That may be the easiest, cheapest and best way to grow your business fast.
Why and How?
Why? Think about your own experience with your business and how to grow it. The big ideas are exciting, but the simpler growth usually wins.
Here’s a breakdown to help you see the advantages for yourself.
1. List the various ways you’re already considering for growing your business. We all do that when we’re alone, right? And I bet you have options in your head, always. I do. Take a step back from the details, get out of the routine and make a list of the ideas hanging around in the back of your mind. Don’t do details. Don’t think about them more than you already have. Just list them.
2. Divide those options into these four categories: selling something new to a new market; selling something new to your existing market; selling more of what you already sell to your existing market, and selling what you already sell to a new market. It’s not always immediately obvious which is which, but stay loose and flexible. Assume you’ll have to push and pull a bit to make the division clean.
3. Look at what you’ve got. I predict that the big new ideas, the ones you’d put into category 1, are the ones that take most of your thinking time. What I’ve seen in years of running my own company and reading business plans of other companies is that we business owners are naturally more excited about something completely new—the big idea and the big win. Thinking of new things to sell, and new people to sell them to, can be a kick. It’s much more interesting than thinking about how to increase our average sale per customer or client, or selling more to the existing base. Is that what you see with your list?
4. Bear down on what it really would take to make the leap to new products and new markets. Think about the background involved in developing, finding, testing or whatever else is involved in generating a new line of business. It takes time and money, right? And then add in what it takes to reach a new market, a different type of customer. That takes identifying this new group, understanding how you can help them, how to reach them, what messaging to use and so forth. And then combine those two efforts together. In most real businesses, a lot of this is trial and error, and learning by doing, which involves making mistakes, and can be really expensive.
5. Focus on the things you could do to sell more of what you already sell to your existing customers. In this case, you don’t have to develop and test new things; you already have them. And you don’t have to find and get to know new customers, because these are your existing customers. And they already know you. So this kind of growth is easier to manage. Therefore it can be faster, better and less capital intensive.
The first time I saw this breakdown was while consulting with Apple Computer in the 1990s. Researchers studied 800 computer dealers over three years. They divided their growth into these four categories. They concluded that growth in category 3 needed roughly 15 cents of new capital per dollar of growth; growth in category 1 needed about 75 cents per dollar of growth; and categories 2 and 4 needed 45 to 55 cents per dollar of growth. The new capital in this equation is additional working capital, new investment or new loans.
The big wins may be getting new products to new markets, but the easy and less expensive wins involve selling more existing product to existing customers.
The confidentiality related to that study expired years ago, but it was a proprietary internal study so I can’t link to the source. But I can tell you that I’ve seen that growth framework in action many times. I saw it building my own business, advising entrepreneurs, teaching entrepreneurs, investing as an angel investor and judging business plan competitions. The big wins may be getting new products to new markets, but the easy and less expensive wins involve selling more existing product to existing customers. There are exceptions of course, but that seems to be the rule.
How to Apply This to Your Business
I suggest you find your “existing product to existing customers” opportunities. The example I worked with for years was computer stores offering their existing customers more storage capacity, newer updated computers and software, and more bandwidth to existing installations. Sales grew fast, and the customers loved it—proving not all business growth is created equal.
Credit: American Express Open Forum