Business growth typically falls into two main categories: organic and strategic. Each type has its benefits and challenges.
- Organic business growth happens naturally as a company builds a recognizable brand and a solid reputation in the marketplace. Organic growth relies on optimizing internal processes and resources, rather than growing through external transactions like mergers or acquisitions.
- Strategic business growth, often referred to as inorganic growth, is carefully planned and executed. It typically happens as a result of opening new locations or engaging in mergers, acquisitions, or partnerships.
Pros and cons of organic vs. strategic business growth
Organic growth is usually seen as the more sustainable and stable approach, but it can take much longer to see results than strategic growth. And while strategic growth through a merger or acquisition could mean an immediate boost in market share and assets, it could also require giving up some control and sharing profits.
Organic and strategic growth also require different types of funding—another factor to consider when building a growth plan.
“Organic growth is often funded through working capital,” says Katie Saez, Georgia regional president at Truist. “That could be cash flow that comes from the company itself or perhaps a line of credit that’s opened to support working capital needs. When it comes to financing strategic growth, such as building a new location or acquiring another business, companies typically need to tap into long-term, structured forms of financing or credit.”
Your Truist relationship manager can help you navigate and implement the right types of funding for your growth plan.
8 growth tactics to help you meet business goals
Organic
- Market penetration: Boost market share by developing ways to encourage brand loyalty, which can result in increased sales of your existing products or services to current or similar customers. Customer rewards, creating testimonials, or getting top customers to participate in feedback sessions are some ways of building brand loyalty.
- Market development: Grow your business by expanding sales to previously untapped customer segments, such as different industries, demographics, or corporate departments.
- Product innovation: Attract new customers by enhancing current products with refreshed features or by creating additional products and services that appeal to a wider audience.
- Operational efficiency: Gradually increase income and profitability by implementing efficiencies that streamline processes and drive down costs.
Strategic
- Geographic expansion: Increase sales by offering products or opening offices or retail space in new regions or even other countries.
- Acquisitions: Buy another business to reduce competition, gain new technology or other capabilities, or tap into a new customer base.
- Joint ventures and partnerships: Form a strategic alliance with another business to share resources and expertise that could help develop products, markets, or efficiencies.
- Divestiture: Bigger isn’t always better. Divesting noncore assets or underperforming business segments can fuel long-term growth. Take a hard look at your operations and determine what to cut so you can focus resources on what you keep.
Some of these tactics may work best at certain stages of the business lifecycle. For example, acquisitions tend to be more common in the established stage, while divestiture may happen more often in the transition stage. But the move that works best for your company depends on your situation and goals.
Keep an eye on the big picture.
Before implementing any growth strategy, think about how it could affect your overall business value.
“Often, clients are focused on top-line growth, but we know that doesn’t always drive enterprise value,” says Lee. “For example, if the amount of capital required to make growth happen will be more than you’ll get out of the transaction in the long run, it may not be worth it.”
A Truist relationship manager can help you weigh the options, decide when the rewards outweigh the risks, and find funding to bring your plan to fruition.
