Every business needs to grow in order to survive. Growth enables your business to meet new opportunities and market demand, as well as to expand and diversify the range of products or services you offer. Economies of scale often mean that bigger companies incur lower costs, which means that you can broaden your supply base and take chances in terms of innovating in order to stay fresh in a changing market.
However, growth needs to be carefully planned and undertaken for the right reasons in order to be sustainable. A company that becomes too big too quickly becomes vulnerable to market pressures. It becomes like a top-heavy building with endless extensions and additional floors added willy-nilly, without proper architectural groundwork or solid foundations. Such a structure can easily overreach itself and suddenly collapse without warning.
As your business grows, it will inevitably expand into new markets. This will probably involve doing business in different countries and trading in different currencies, which will put your business at risk from currency fluctuation. For example, you may buy particular supplies from Europe, but a sharp shift in the exchange rate between the Canadian dollar and the euro could easily throw your annual budget off course.
One way that you can strategically hedge against this is by purchasing currency options, which gives you the right to buy a certain currency at an agreed price at any point up to a certain date. This acts as an insurance policy against unfavourable changes in the exchange rate, even if you never need to use it.
It’s essential to be ready for unforeseen eventualities, such as a downturn in the market or a break in supplies. As well as identifying possible risks, it should include back-up plans to help you deal with these occurrences in a considered way. This means having provisions in place both to reduce the likelihood of unwanted situations occurring, and to reduce the amount of damage sustained if and when they do. In this way, a business strategy should also incorporate a business continuity plan.
Creating a business strategy
A business strategy is simply a written document that outlines your business goals and how you intend to achieve them. This should cover both short-term goals – over the next six months – and long-term goals, achievable in the years or even decades to come. It should also include your business’s key principles and values, which may include ethical and environmental policies.
Knowing your business
A clear strategy allows everyone involved to understand the business and see clearly its strengths and weaknesses, as well as its core principles and what it stands for. When rapid growth occurs, it can be easy to lose sight of all of these things, which can lead to serious problems in the future. Knowing what your business capabilities are, how to measure your performance, and what is at the heart of everything you do will let you grow steadily and organically. A business should grow for the right reasons, and a sound strategy will allow this to happen.