If you’re looking to grow your business, one of the critical aspects you need to master is sustainability. It may be a good idea to consult with a professional (like the London accountants Howlader & co.) to get your finances right to allow for sustainable action since sustainable business growth balances profitability today with sustained future growth that allows you to succeed in the long run. It’s in your best interest to instead take a sustainable approach you can rely on for years to come.
Today, we focus on seven things you might not know that contribute to sustainable business growth. First, let’s ensure we’re on the same page by defining sustainable business growth.
Sustainable business growth
Sustainable business growth relies on planning to ensure a profitable future for your business balanced with efforts designed to optimize today’s performance. Maybe an example will help.
The dot-com bubble
In the early days of Amazon, the company bled red ink. That was during the go-go days of the dotcoms when plucky startups were throwing up websites and making bank by selling online. Probably the most spectacular failure was Pets.com, losing something on the order of $300 million on investor capital by the time the dust cleared.
In contrast to the love affair between dotcoms and investors/ business analysts, Amazon was predicted to fail and fail spectacularly because they were not only losing money, they projected losses would continue for the next 5 years.
What a loser, thought financial markets.
Of course, we all know how this situation played out. The dot-com bubble burst, leaving investors with millions of dollars of wasted capital, while Amazon continued investing in sustainable business growth to become the industry leader derided by competitors and antitrust regulators for their unprecedented success.
Investing in the future
So, how did Amazon succeed when most competitors failed miserably?
Amazon recognized the fundamental challenge inherent in e-commerce, something other businesses missed in their haste to turn a profit and attract more investment capital. And, that fundamental challenge was logistics, not internet technology, attracting customers, or pricing (the focus of its competitors). While other businesses offered free shipping as a loss-leader, Amazon focused on building the infrastructure, both physical and analytical, needed to meet the twin logistical challenges of fast delivery at a reasonable price. Meeting these challenges was impossible without investment in warehouses, material handling equipment, and people.
Instead of competing for the relatively small number of internet users willing to make online purchases, Amazon positioned itself to capitalize on the massive anticipated growth in e-commerce. When the shoppers arrived, Amazon was there to serve them with fast, low-cost shipping.
7 things you might not know about sustainable business growth
Planning for sustainable business growth requires research into the factors that impact future growth, as you can see from the image above. Growth planning takes a concerted effort to anticipate what the world will look like in the future, and how you can meet future customer needs as well as potential changes in the environment. Then, and this is likely the most crucial element of growth planning involves a willingness to delay gratification; to invest in your business’s future by reducing current profits.
So, how do you do that?
Get the day-to-day fundamentals right
First of all, you must ensure you get the day-to-day fundamentals of running your business right. You must establish processes that allow for maximum efficiency and productivity in your workplace and do the important things right, such as balancing the books and monitoring cash flow.
Set aside some profits or investment capital for improvements and new products. R&D (research and development) isn’t just the purview of tech companies and manufacturers, every business must plan for the future obsolescence of their existing brands by creating brands to enliven their future.
If you ever read anything about Steve Jobs or Apple computers, you see the difficult decision made to scrap the Lisa computer in favor of the new Macintosh. Jobs was fired from his own company for suggesting they cannibalize resources and sales from the successful Lisa in order to develop a new computer based on assumptions that they could develop the technology envisions by Jobs. Ultimately, the managers recognized the wisdom of Job’s plans and they brought him back to head of the Macintosh project. The rest is history.
Balance customer retention with customer acquisition
When you try to grow your business, it’s tempting to spend most of your time chasing new customers. That’s how a business grows, right? Well, not necessarily. If you want to ensure your business growth is sustainable, you must balance customer acquisition with customer retention so you extract as much value as possible from each customer you have.
We introduce two concepts here; CLV (customer lifetime value) and AOV (average order value). Both concepts recognize that customers represent value over time (CLV) and it’s more profitable to sell to existing customers than attract new ones. In fact, a study reported in HBR shows that a 5% increase in customer retention results in increasing profits by 25% to 95%. That’s a massive number.
Develop contingency plans
Having a plan B in place is certainly a good idea. It’s impossible to know what might go wrong and it’s often the case that your business faces something that gums up the works so that all of the things you planned quickly go up in flames.
When that happens, you need a backup plan so you quickly and efficiently switch to an alternative strategy without disrupting your organization or your customers unduly. Of course, you can’t anticipate every eventuality but some events happen with regularity.
For instance, airlines, with some of the lowest customer satisfaction values of any industry, should anticipate weather delays and equipment failures as both are routine problems faced in the industry with a large potential for disruption. By planning for bad weather or equipment failures, the airline quickly pivots to a new plan to keep everyone happy with a minimum of fuss.
Evolve and change
It’s up to you to do what you can to prepare your business for the necessity of change and evolution. Things don’t always stay the same, and businesses must prepare to move with the times if they want to avoid being left behind. That’s always been true, and it’s certainly true today as things seem to change at a faster pace than ever before in many industries. So it’s up to you to ensure your business prepares for the coming world by making strategic investments and updating strategic plans.
Professionalize your marketing approach
If you plan to grow your business sustainably and consistently, you need a professional approach to marketing. Without a professional approach to marketing, you struggle to appeal to the right people and get your ads and message in front of that target marketing in a way that moves them to make a purchase. Focus on marketing to your niche; for example, software companies should work with a SaaS marketing agency to improve their marketing strategies.
Build and lead a team effectively
Building a team capable of driving your business towards success is key. If you don’t have the right personnel in place and your team doesn’t contain the right mix of skills, competencies, and temperaments, your attempts to run a successful business get a whole lot harder. On top of that, you must work to keep lead your team to get the most from their efforts by keeping them motivated and collaborative.
Establish sustainable partnerships
No business is an island, and that’s something you must remember as you build plans for sustainable business growth. If you want to ensure your business remains sustainable, you first need to establish positive and sustainable partnerships with third-party companies, such as suppliers, service providers, wholesalers and retailers, and any other businesses you need to support your goals. When you put these sustainable partnerships in place, you make sure you always have the reliable support and services you need.
Growth is the number one goal for many entrepreneurs, but your ambitions need concrete plans based on the future of your industry, your customer needs, the competition, and environmental factors, such as the economy. Make the most of the tips shared above and you’re in a position to achieve sustainable business growth.
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Sustainable business growth and success is something that all businesses should strive towards.