In this Real Business guide, we look at the multiple ways you can grow your small-to-medium business, including what mistakes to avoid. Small businesses have to fight against the odds to survive, and that’s why it’s important that owners understand business growth.
The Office for National Statistics tracks how long new UK businesses last. Of businesses born in 2023, 93.4% made it through their first year. The attrition comes later: only 55.9% reach three years, and just 38.4% of businesses reach five. In other words, close to two in three new businesses are gone within five years, and the steepest drop happens in years two and three, once the founding energy and any startup funding have run down.
That middle stretch is precisely the period this guide is about.
When growing a business, many different things have to be considered, from deciding upon an effective growth strategy to thinking about how your business is going to target, engage and retain a loyal customer base. Customer relationship management and marketing efforts go hand in hand to keep and reach potential customers for maximum impact.
During the early stages of running a business, owners tend to take on sales, marketing, financial and customer care roles as well as being a strategic leader, at least until you’ve grown your business enough to afford hiring more people.
So how can small business leaders impact their business growth and drive more sales and success?
What Is A Business Growth Strategy?
A business growth strategy is a plan for how a company will increase revenue, customers or market share over a defined period. It sets out which markets you’ll sell into, what you’ll sell them, and how you’ll fund and resource the expansion, so that growth is deliberate rather than accidental.
The useful test of a growth strategy is whether it tells you what not to do. A plan that says yes to every opportunity isn’t a strategy, it’s a wish list.
The Four Main Business Growth Strategies: Market Development and More
Most growth plans, however they’re dressed up, are a version of one of four strategies. The framework is the Ansoff Matrix, from the economist Igor Ansoff, who set it out in the Harvard Business Review in 1957, and it still holds because it asks the only two questions that matter: are you selling to existing customers or new ones, and are you selling an existing product or a new one.
1. Market penetration means expanding market share in the current market with existing products. It’s the lowest-risk option because you know both the product and the customer. In practice it looks like increasing order frequency, winning share from a competitor, raising prices, or reducing churn. Most SMEs have more room here than they think, and it’s almost always cheaper than the alternatives.
2. Market development means selling existing products to new markets. That might be entering new geographical areas, reaching new customer demographics, or establishing new distribution channels, for instance a business that has always sold direct now selling through retailers. The product risk is low, the customer risk is real: what works in one market often doesn’t translate.
3. Product development means launching new products or adding new features for the customers you already have. You know the audience and you have the relationship, so the route to market is short. The risk sits in development cost and in whether the new thing is genuinely wanted or just something you were able to build, but adapting what you already sell can help with increasing sales.
4. Diversification means selling new products in new markets. It’s the highest risk growth strategy by some distance, because you’re learning two things at once with no safety net. It can increase revenue, and it’s occasionally the right call, usually when your existing market is shrinking, but it’s rarely the right first move.
Most successful SME growth is a sequence rather than a single choice: effective growth strategies usually start with market penetration, then product development and market expansion. Diversification is what you do when you’ve run out of room, not when you’re bored.
How To Grow Your Business
With so many different aspects to consider, thinking about the first step when growing a business can feel overwhelming. The best place to start is deciding upon a growth strategy. This will ultimately help you grow your business’ market share.
1. Have A Growth Strategy
With 64% of UK employees dreaming of starting their own businesses, there’s no doubt that Britain is a nation with entrepreneurial aspirations.
Considering that 83% of Gen Z, the country’s future majority workforce, also want to start their own businesses, it’s essential that everyone understands not only how to start a business, but how to grow one too.
Whether you’re the owner of a startup, a small, or a small to medium business, having a growth strategy is essential to grow at scale. Businesses can expand through organic growth from internal operations or through inorganic growth such as acquisitions or outside investment. However, implementing an effective growth strategy takes time, and they should be tailored to the individual business in question.
To make a start on their growth strategy, business owners should ask themselves a series of questions, such as the ones below:
- Where is my business right now?
- Is my business model still set up to support the company’s growth?
- How do I get it from here to where I want it to be?
- What gives my business a competitive advantage over my competitors?
- Why do my customers come to my business instead of them?
- Who is my ideal customer?
- Does what I offer still match customer needs and customer preferences?
- How can I increase customer loyalty and keep satisfied customers who will return? Could a customer loyalty programme help?
- Which of the four growth strategies above am I actually choosing, and what am I choosing not to do?
Once these questions have been answered, owners can determine the central value of their business, ie what makes the business special or stand out. It may be that your customers are younger and would value a business that can actually practice corporate social responsibility, taking action on things your customers care about such as climate change or microplastics.
Dealing with these questions can also help owners solidify the company’s missions, including short and longer-term goals tied to key performance indicators, ie right now, we reach X customers, but in five years’ time, we aim to reach Y. These aims are all central to determining a growth strategy. But customer retention shouldn’t be forgotten during the dizzy heights of growth.
Owners should then establish the “facts” of their business, such as what the revenue streams are, while also reviewing resources and using a SWOT analysis to decide which new opportunities to pursue. Following this, they can start analysing their major competitors, and evaluate what their own brand’s strengths are.
While these strengths may not initially seem like advantages, for example “our competitor is larger than us”, unique facts about your business can give it an edge against your competition: “but we are smaller and therefore more agile to market changes.” Analysing these strengths and facts also means making sure resources are allocated in line with the chosen strategy to support sustainable growth and long term success.
Once you establish and analyse unique facts and strengths related to your business, you can use them as tools for growth and to improve your competitive position as business conditions change.
2. Adopt New Technology
Business, like the rest of the world, is going digital. This means you could be missing out on key growth opportunities if you ignore new technologies that can simplify your life or streamline processes in your business, because adopting technology is also about digital transformation, strengthening your online presence, and reaching high-intent digital buyers. Great customer service today usually comes at the hands of technology, so you could be missing out by not investing in key tech for your business.
If you’re having trouble warming to this new digital age, remember that technology is about innovation, and finding new ways to do things that drive success.
A majority of the workforce will soon be Gen Z. They are entering the job market as digital natives, meaning they bring with them unique insights and are able to use new technologies immediately.
As an employer, you don’t want to appear resistant to new technology, as this could put this talented new talent pool off applying to your business, potentially stalling growth via missed opportunities.
While technology can be used to make existing business processes easier, such as automating laborious administrative processes, it should also be used to find new and effective ways of doing business that will drive growth. With the right tech you can find new customers, encourage repeat business, and expand your reach beyond traditional channels. What’s more, the technology doesn’t have to be hard to use. Take digital marketing technology, for example.
3. Have A Digital Strategy In Place
Having an online presence is a prerequisite for any successful business today. Gone are the days of relying on in-person networking events alone: if you’re not online, your business will be left in the cold. However, it’s pointless if there isn’t an effective digital marketing strategy underpinning it, as businesses will miss out on key customer engagement opportunities.
Here are the points to be thinking about before deciding upon a digital marketing strategy:
- What are your aims, and who is your target audience?
- What are your tactics?
- How are you going to measure performance, including channel performance against customer acquisition costs and lifetime value?
Some business owners make the mistake of thinking that a nice looking business website is all that’s needed to grow a business online. But this isn’t enough. They must make sure that business websites are search-engine optimised and user-friendly, especially for mobile device users as well as desktop-based browsers. Retail businesses in particular should have a fully integrated and fast response e-commerce shop on their websites too. With online consumers increasingly making purchases from mobile or tablet devices, businesses must also ensure their websites cater to these preferences.
How To Achieve Digital Strategic Planning Success
An effective digital strategy doesn’t stop with a pretty website. Business owners must also ensure they take advantage of the various social media channels on offer to better target and engage with their customer base, also known as social media marketing.
For example, if your business offers a service, X (formerly Twitter) is a useful tool to engage with customers when dealing with complaints or promoting your level of customer care or support generally. Email marketing is also an effective way to remind your loyal customer base about your goods and services, to encourage existing customers to buy again or refer others, or to update them with news about the business. Strong post-purchase communication supports customer retention, which can reduce customer acquisition costs, and customer acquisition costs and lifetime value are key metrics for assessing how well a growth strategy is working.
SME owners must never forget the digital in digital marketing, as these technologies boost growth by allowing businesses to reach audiences they wouldn’t have been able to otherwise, as well as helping them build a loyal customer base and deliver practical benefits for reaching and retaining customers.
4. Train Your Staff
Investing time and money into staff development can help a business grow by supporting productivity, efficiency and service quality as the business scales, while also making employees feel like engaged, motivated and most importantly valued assets to a business.
Motivated staff are more likely to go the extra mile in a business, pushing it towards growth, leading to higher productivity and output generally.
At a basic level, well-trained employees have the competency, aptitude and skills to keep the business running when you’re busy or away, and will be able to service customers better.
Training staff starts by setting up a staff training programme in your business. Whether you do it via a presentation or print out a booklet for them to keep, ensure you write down what you want your employees to learn in order to work in your business.
Start by covering the most basic skillsets you expect from staff and build from there to cover more specialised or sophisticated skills certain members of staff might need. Running through these expectations with staff will help you identify any skills gaps in your team, such as a lack of training in computer software.
Without basic skills training, staff may not be able to perform the more sophisticated forms of operations in a business. Ensure you upskill them from the ground up, as it’s more time-consuming to re-teach staff than to build on a strong basic foundation of knowledge and skillsets.
How To Train Your Staff Effectively
Holding regular training sessions can be useful. A popular option is holding sessions where teams can get together to learn a new skill over their lunch break.
Also known as “lunch and learns”, you don’t always have to do the teaching. In fact, employees themselves can take turns hosting these sessions, using their specialist knowledge in a certain area of the business to upskill their peers.
Bringing members of different departments together to work on collaborative projects can also help the natural exchange of skillsets across a business.
However, training and upskilling staff can be a redundant exercise if it’s not implemented regularly, and if goals, objectives and performance reviews aren’t put in place to ensure they are learning and progressing.
5. Managing Payments
With consumers demanding increasingly flexible payment options, smaller businesses must offer them as many different payment options as possible.
The direction of travel is not subtle. UK Finance figures show card payments now account for around 64% of all UK payments, with debit cards alone making up over half the total at 26.1 billion transactions. Cash has fallen to roughly 8% of payments, down from 45% a decade ago. Around two thirds of UK adults are now registered for at least one mobile payment service.
A business that can’t take a card, or can’t take a contactless or mobile payment, is turning away a meaningful share of its potential customers at the last possible moment.
Small business owners must therefore ensure they have card machines in their stores, including a contactless payments option.
For retail businesses in particular, it’s vital that consumers can pay for goods easily online. Having a fully functioning e-commerce shop on their business website is essential. Businesses should also provide a variety of payment options for customers, from online to in-person and even over the phone, making payment easier to reduce friction, support conversion, and increase margins, while ensuring that customer payment preferences are met across different products or services.
Common Business Growth Mistakes To Avoid
Growth kills more small businesses than stagnation does, usually through cash rather than demand.
- Growing faster than your cash allows. Profitable businesses go under all the time because the money goes out before it comes in. New stock, new staff and new premises are paid for months before the resulting revenue arrives. Forecast cash, not just sales.
- Hiring for the business you hope to have. Taking on senior salaries on the strength of a pipeline that hasn’t closed is one of the most common ways growth turns into a redundancy round.
- Chasing revenue that isn’t profitable. A big contract at a bad margin ties up your capacity and makes you feel successful while you’re going backwards. Know your margin per customer before you take the work, and make sure growth protects profits, not just top-line sales.
- Losing the thing that made you good. Businesses that grow quickly often dilute the service quality or the product that earned them the growth in the first place. Your existing customers are cheaper to keep than new ones are to win, and neglecting customer needs during growth often weakens retention.
- Waiting for perfect. The opposite mistake, and just as common. No growth plan survives contact with the market, so a good plan started now generally beats a flawless one started in six months, even with market penetration, often the lowest risk growth strategy, where reducing prices, promotions and targeted advertising can help but results still depend on business conditions and disciplined execution.
SME Owners On How They Grew Their Businesses
1. Ceri-Jane Hackling, managing director, Cerub PR
On networking
I started my business working from my spare room with my partner’s laptop and my mobile phone. The most important thing I did was to start networking. When I started the business I hadn’t even realised that networking was for small businesses, but I made an effort to attend as many groups as I could so that I could decide which ones were right for me and which weren’t. Through networking, I met a lot of people, but I realised quite quickly that I wasn’t necessarily going to meet clients through the people in the room, but through the people that they knew. I gradually began to grow my network, which meant I met people who could introduce me to other groups and other people, potential suppliers and a support network of people who were also going through the same challenges I was. I still network and have stayed in touch with a number of people I met in the early days, and many have become friends. In the early stages, I was very keen to keep costs down. I know many people who have started a business and moved into offices straight away, but I wanted to make sure that we had a very strong client base and money in the bank before we even considered moving into premises. Even though I had staff, we worked from my house until the end of 2007 and moved into our offices four years after I started the business.
On making mistakes
We’ve been in business for almost 17 years but it hasn’t been plain sailing. I’ve made mistakes in employing people and have employed people because I liked them rather than because they could do the job, so if you’re in a small company it’s worth getting someone external to interview with you to give another perspective. It’s worth realising that if you have made the wrong decision, it’s better to admit it and cut your losses early, otherwise you run the risk of letting clients down and upsetting the harmony in the office.
I’ve also been too trusting with clients. We’ve had clients who have ended up not paying invoices for several months and I’ve told the team to continue to work with them, trusting that they would pay the debt. Looking back I would be much tougher and stop work much earlier. We’ve had clients go into administration, which means that you don’t recoup any of the outstanding money. The main thing I’ve learnt is to take a step back from the business. When you’re working with clients you can get absorbed in the work you’re doing, which means that you run the risk of taking your eye off the most important thing, which is growing the company and generating new work. As the boss, it’s your responsibility to look at the bottom line, focus on the business plan and plan for the future. Delegate where you can and look at the big picture.
2. Simon Crowther, founder of Flood Protection Solutions
On credibility
I was just 18 when I founded the company, and I knew that building credibility would need to be key for us to succeed. I believe one of the reasons the company has been a success is due to us having a distinct focus on credibility as a key differentiator. As the Managing Director I set my goals high, knowing I needed to excel not only with qualifications, but also my industry profile. I built my personal profile through a strong focus on PR, including speaking at industry events and being featured on Sky News as their flood expert. Alongside this, I became Chartered, and have won multiple awards, including being featured by Forbes Magazine in their 30 Under 30 List. This was a key differentiator from others in the sector, and the additional qualifications obtained allowed me to expand the company into new areas. I have also had a strong focus on the profile of the company, working hard to win company awards and obtain case studies and testimonials, along with slick digital marketing for our company to appear as credible as possible. We have an enviable client list including Thames Water, the NHS and the Environment Agency.
3. Jacqueline Barleycorn, founder, The Great British Porridge Co
On marketing
I put approximately £30k of my own savings into launching my 100% natural, no added sugar instant porridge brand, and I convinced my husband he didn’t need his dream car he was saving for. I totally underestimated how much I would need to put in, there were so many unthought-of costs that kept cropping up. I started by setting up a Facebook page and selling through there, then approaching retailers, and then having a website designed.
I mainly spread the word through social media, it’s such a great tool. Then shops started stocking it and it just started snowballing. I realised quite early on that to grow the business I really didn’t have the expertise, so I managed to find myself two amazing business partners, Hayley and Matt Hunt, who had already grown their own business The Protein Ball Co to over £4m in turnover. Luckily they believed in the porridge from day one and loved it. They were big fans of it so I kept dropping round to see them at their office delivering bags of porridge, asking their advice and telling them how well it was doing, till they took the hint. One of the biggest challenges is to get things like packaging and ingredients at a low enough price: to make the porridge at the right price you need to buy in massive quantities, but you can’t do that until you have massive orders, and you don’t get those till you get the porridge to the right price. It’s a very challenging vicious circle. It’s also important to realise that you can’t do everything yourself, and finding people to help you means you can focus on what you are good at rather than spending valuable time on what you struggle with. I think it’s important to trust your gut instinct, and expect it to be a lot harder than you thought. You’ll live and breathe it and never switch off, but the highs from it are amazing and make it all worthwhile. I get some nights where I can’t sleep simply because of the excitement of it all. Running my own business is an incredible experience.
Frequently Asked Questions
What are the four main strategies for business growth?
Market penetration, market development, product development and diversification. The framework comes from Igor Ansoff’s 1957 Harvard Business Review article and sorts growth by two variables: whether the customer is existing or new, and whether the product is existing or new. Market penetration is the lowest risk, diversification the highest.
What is a business growth strategy?
A plan setting out how a company will increase revenue, customers or market share over a defined period, covering which markets it will sell into, what it will sell, and how the expansion will be funded and resourced.
What are the 7 stages of business growth?
There’s no single official model, and the stages are named differently depending on the source. The version most commonly used runs: seed, startup, growth, established, expansion, maturity and exit, with maturity often centered on efficiency while looking for new opportunities. Academic models such as Greiner’s differ, so treat any version as a rough map rather than a rule. A company’s growth may be organic, using internal resources to expand sales and operations, or inorganic, driven by partnerships, mergers or acquisitions; this can mean expanding into markets faster, gaining economies of scale, accessing established customer bases and technologies, or opening new locations once operations are working consistently.
What are the 5 P’s of business strategy?
Plan, ploy, pattern, position and perspective, set out by Henry Mintzberg. They describe five different things people mean when they say “strategy”, rather than five steps to follow.
How long does it take to grow a small business?
Longer than most plans assume. ONS data shows only 38.4% of UK businesses are still trading after five years, with the sharpest fall in years two and three. Sustainable growth is usually measured in years, not quarters.
What is the safest way to grow a business?
Market penetration: selling more of what you already sell to the customers you already have, with the aim of winning more customers and expanding market share in the existing market. You know the product works and you know the audience, so the risk is largely execution rather than assumption, and tactics can include promotions, targeted advertising, or price changes if margins allow. Most SMEs have more headroom here than they realise.
