The Only Three Ways to Grow a Business
Business growth can quickly become complicated.
There are marketing strategies, sales systems, pricing models, automation tools, new products, recruitment plans and countless other ideas designed to help businesses grow.
But underneath almost every growth strategy are the same three fundamentals.
There are only three basic ways to grow a business:
- Get more customers
- Generate more value from the customers you already have
- Become more efficient
Everything else is largely a tactic for improving one — or a combination — of those three areas.
Understanding this gives business owners a much clearer framework for deciding where to focus their time, money and attention.
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This article expands on one of our latest short videos, where we explain the three fundamental ways a business can grow.
For more straightforward accounting and business advice, watch more from the Merranti team on TikTok.
1. Get more customers
The first growth lever is straightforward: increase the number of customers buying from the business.
For many owners, this is what immediately comes to mind when they think about growth.
More customers could come from:
- Better marketing
- More referrals
- Increased sales activity
- Entering a new market
- Improving your website
- Developing partnerships
- Launching a new service
- Improving conversion rates
However, simply deciding that you need “more customers” is not enough.
The important question is where the constraint currently sits.
For example, a business might already generate plenty of enquiries but convert relatively few into paying customers.
In that situation, spending significantly more on advertising may not solve the underlying problem.
The stronger opportunity may be improving the sales process and converting more of the demand the business already has.
Another business may have an excellent conversion rate but simply not generate enough enquiries.
That business may genuinely need to increase its marketing activity.
Before spending more money trying to acquire customers, understand the numbers behind your existing customer journey.
2. Generate more value from your existing customers
Growth does not always require finding somebody new.
For many established businesses, the existing customer base represents a significant growth opportunity.
Generating more customer value could mean:
- Improving customer retention
- Increasing repeat purchases
- Providing additional relevant services
- Cross-selling complementary products
- Reviewing pricing
- Increasing purchasing frequency
- Developing recurring revenue
- Improving the overall customer experience
This should not be confused with simply trying to charge people more.
The objective is to create more value for the customer while ensuring the business receives an appropriate financial return for delivering it.
Consider two businesses that each have 500 customers.
In the first business, customers purchase once and rarely return.
In the second, customers stay for several years, purchase additional services and regularly recommend the business to others.
The second company may be able to grow significantly faster without constantly having to replace customers who leave.
That is why customer retention, average customer value and repeat business can be just as important as customer acquisition.
3. Become more efficient
The third growth lever is often overlooked because it does not necessarily involve selling more.
Sometimes growth comes from becoming better at delivering what the business already sells.
Improving efficiency could involve:
- Automating repetitive administration
- Improving internal processes
- Reducing duplicated work
- Improving staff productivity
- Reviewing supplier costs
- Reducing unnecessary expenditure
- Improving stock management
- Using technology more effectively
- Improving project or job profitability
- Removing bottlenecks
Efficiency does not simply mean cutting costs.
There is an important difference between reducing waste and removing resources that the business genuinely needs.
Good efficiency improvements allow the company to achieve the same — or a better — result while using its time, money and resources more effectively.
The result can be stronger margins, additional capacity and a business that is easier to scale.
The three growth levers are connected
In practice, businesses rarely work on just one of these areas.
They interact with each other.
Imagine a company successfully increases new customer numbers by 30%.
That sounds like strong growth.
But what happens if its existing team is already at maximum capacity?
More customers could create longer lead times, lower service quality, frustrated staff and unhappy clients.
In that case, improving efficiency may need to happen before aggressively pursuing more customers.
Alternatively, a highly efficient business may still struggle if it does not generate enough demand.
Another company might attract plenty of new customers but lose existing customers almost as quickly as it gains them.
A sustainable growth strategy therefore needs to consider all three areas together.
Which growth lever should you focus on?
This is where financial and management information becomes particularly useful.
Rather than choosing a growth strategy because it sounds appealing, look at what is actually happening inside the business.
If you need more customers
Review:
- Enquiry volumes
- Lead sources
- Conversion rates
- Sales pipeline
- Customer acquisition costs
If operations and margins are healthy but sales volumes remain too low, increasing customer acquisition may be the logical priority.
If you need more value from customers
Review:
- Average customer revenue
- Customer retention
- Repeat purchasing
- Pricing
- Service mix
- Customer profitability
You may already have a strong customer base but be missing opportunities to provide additional value.
If you need greater efficiency
Review:
- Gross profit margin
- Overheads
- Staff utilisation
- Productivity
- Project profitability
- Cash flow
- Operational capacity
Growing turnover is useful only when the additional business contributes positively to the company.
Turnover growth is not the same as profitable growth
This distinction matters.
A company can increase sales significantly and still end up financially weaker.
If revenue rises but the costs required to generate and deliver that revenue increase even faster, profitability can fall.
Rapid growth can also put considerable pressure on cash flow.
A company may need to recruit staff, purchase stock or pay suppliers before it receives payment from its new customers.
That means business owners need to look beyond turnover.
They should understand:
- Gross profit
- Net profitability
- Cash flow
- Capacity
- Customer profitability
- Overhead movement
- Working-capital requirements
Regular Financial & Management Accounts can help provide this visibility.
Management information allows owners to compare actual performance with expectations, monitor cash flow and understand whether growth is improving the business financially.
Do not try to improve everything at once
A common problem with growth plans is creating too many priorities.
A business decides it needs a new website, new software, more employees, another marketing channel, a different pricing strategy and an entirely new sales process — all at the same time.
Each idea may be reasonable.
But attempting to change everything makes execution difficult and makes it harder to identify what is actually producing results.
Instead, return to the three growth levers.
Ask:
Do we primarily need more customers?
Do we need more value from the customers we already have?
Or do we need to become more efficient?
Identify the biggest constraint and prioritise the actions most likely to improve it.
Then measure the result.
Keep business growth simple
There may be hundreds of individual business-growth tactics, but the underlying mechanics remain relatively simple.
You can:
Get more customers.
Generate more value from those customers.
Become more efficient.
Everything else is largely a method for improving one or more of these three areas.
The difficult part is identifying which lever offers the greatest opportunity for your business right now.
That requires good information, clear priorities and an understanding of how changes will affect profit and cash flow — not simply turnover.
Looking to grow your business?
Merranti works with business owners who want a clearer understanding of their numbers and where their opportunities lie.
Through management accounts, budgeting, forecasting and ongoing business advice, we can help you assess your current performance and make better-informed decisions about the next stage of your business.
Speak to Merranti about your growth plans →
Watch more from Merranti
Want more practical business and accounting insights?
Watch more from the Merranti team on TikTok for short videos covering business growth, accounting, tax and financial management.
Written by Jenny Seaford ACPA
Senior Accountant, Merranti Accounting
Jenny is a Senior Accountant at Merranti Accounting and works with businesses on their accounting requirements, helping owners maintain clear financial information and make informed business decisions.
