Cutting costs is a short-term strategy to help manage expenses and build a quick profit. But as a business leader, you want to focus on a long-term strategy for growth and profitability with your organization. There are many ways to do this, but here are 5 ideas to consider from the Small Business Administration as well as MKS&H’s experience with our diverse client base:
1. Open another location. Expansion allows businesses to move into new geographic markets. It also provides the opportunity for companies to achieve economies of scale. Some signs that management may encounter to consider expansion are (1) not being able to meet customer needs timely and (2) a change in market competition.
2. License your product. This can be an effective, low-cost growth medium, particularly if you have a service product or branded product. Licensing allows you to receive monetary benefits without requiring large investments in capital. You develop and obtain a patent for the product and then find a company to manufacture it. You can benefit from the distribution channels that your chosen manufacturer has already established.
3. Diversify. Review your products or services for diverse streams of income to fill seasonal voids, increase sales and boost profit margins. You could even sell complementary products or services, become a paid speaker, or teach a class in your area of expertise.
4. Merge with, or acquire, another business.Mergers and acquisitions allow companies to expand quickly. These types of transactions can lead to increased market share, elimination of competition, added value to a current product or service and a lower rate of overhead. This can be a detailed endeavor though, wrought with many challenges. From negotiations to financing alternatives and complex accounting and tax issues, we can help you through the process.
5. Expand globally. Look for a foreign distributor that can carry your product and resell it in their market. You can locate foreign distributors by scouring your city or state for a foreign company with a U.S. representative. For more information on this, read our past article on How to Start a Global Sales Strategy for Your Exports.
As you continue to look for ways to grow your business, remember to identify the metrics that are important to you and your business. Become intimate with what drives those metrics north or south. These metrics are important to your decision-making and potential for profit.
If you would like more information or assistance, an MKS&H representative is always ready to discuss how we can support your growth.
About MKS&H: McLean, Koehler, Sparks & Hammond (MKS&H) is a professional service firm with offices in Hunt Valley and Frederick. MKS&H helps owners and organizational leaders become more successful by advising them regarding their financial, technology and human capital management needs.