If you have been pondering over growth opportunities for your business, the timing could not have been better. In October 2015, growth of India’s industrial output reached the highest in the last 5 years. The overwhelming 200+ acquisitions in the startup ecosystem alone, coupled with prominent nation-wide initiatives such as Make-in-India and Digital India, have made 2015 the apt stepping stone to 2016 – the year of growth.
This brings us to the question: how to grow your business in 2016?
- Organic Growth – Growing Within
Pursuing organic growth is a good way to begin your journey of business expansion, especially if your business is yet to tap the market opportunity to the fullest extent. Businesses achieve organic growth in one or more of the following ways – increasing revenue, expanding customer base, and increasing capacity.
- Increasing revenue: Higher revenue could be a natural outcome of increased output, and/or due to shift in pricing strategy. Revenue is often the most common indicator of intrinsic growth of a business. If there’s already an under-served market for your product out there, and your production capacity is currently under-utilised, increasing output is an obvious window to achieve revenue growth.
- Expanding customer base: Your customer base could be limited because you are constrained by geographic reach, distribution channel, marketing endeavour, or because you have a narrow product portfolio. Grow your business in 2016 by breaking these barriers. It is time to enter new markets, explore new business partnership ideas, and launch new products.
- Increasing capacity: Team expansion, introducing efficient technology, infrastructure expansion, fund-raise (debt or equity) are some of the ways to increase your capacity, which in turn could translate into increased output.
- Inorganic Growth – Capitalizing on External Growth Opportunities
Growth is not necessarily an inside-out process. In fact, today there are a number of opportunities for business expansion through strategic growth that is largely exogenous – mergers, acquisitions, and investments, to name the most prominent ones.
Interestingly, such growth need not always be geared exclusively towards ‘growth’ per se, but may emanate from other compelling reasons such as curbing competition, securing foothold in a foreign market, capturing economies of scale and scope, securing superior talent, gaining access to improved technology, or simply securing higher market power in terms of supply and/or demand.
- Mergers and acquisitions (M&A): As a part of business restructuring, two entities may either combine and consolidate into one (merger) or exist as two separate entities with one entity having substantial control over the other (acquisition). While intuitively it makes more sense to execute such transactions between similar entities (two entities from the same business, for example), deals where diverse businesses have joined hands to create synergies are not uncommon. Indian companies signed M&A deals worth $25 bn in 2015, and are geared towards $30 bn in 2016. An example of acquisition in the SME space is that of Anjani Tiles by Ahmedabad based Cera Sanitaryware in 2015.
- Business Investments and Joint Ventures: A favourable risk-return proposition coupled with value derived from a business investment opportunity could be an attractive growth driver for enterprises to collaborate strategically with allied businesses.
- Co-branding: Small businesses especially in the consumer goods/services market often adopt a co-branding strategy to associate their brand with a larger brand in the same or even in diverse businesses.
The inorganic growth path is often beset with twists and turns and elements of surprise. We at IndiaBizForSale.com, for example, have facilitated one such transaction in the recent past in which a one of our clients had reached out to us seeking help with investment in his business or selling out his business, since his enterprise was faced with severe liquidity crunch. However, eventually tables turned when he was approached for a partnership opportunity by another client registered on our portal, who then bailed him out of the liquidity crisis and joined hands with him towards a growth trajectory instead. There has been no looking back since then.
Are there other exciting growth avenues for businesses that you would like to share with us? Please leave a comment below – it is always great to hear from you!