What is growth planning?
Growth planning is the process followed by organizations to determine IF & HOW to pursue a new growth opportunity such as starting a new business line, launching a new product, opening a new sales channel, or expanding geographically to a new location.
This process also involves knowing what resources / conditions (e.g., staff, equipment purchases, facility expansion) would be needed to pursue growth opportunities, as well as how current business lines would be affected (e.g., slow down X to focus on Y).
Why is it important?
A structured and well-informed growth plan enables an ESE to:
- Effectively utilize limited resources on initiatives that have a likelihood of success
- Focus on promising growth opportunities when there are multiple options on the table
- Analyze a wide array of relevant criteria (social / programmatic, financial, operational, and organizational) when making high-level business decisions
Communicate effectively the “Why” or “Why Not” behind growth decisions to your stakeholders (employees, board members, funders, etc.)
Check your imperative for growth
Start by asking yourself whether growth is a fitting goal for your ESE at this moment in time. A few things that signal that an organization might want to explore growth:
- Smooth operations – your current business lines are operating smoothly and you are meeting all of your financial goals.
- Board support – your board operates efficiently and wants your organization to explore growth opportunities.
- Team – you have the right team in place to be able to focus on new opportunities.
- Funding – you have access to funding and capital to be able to launch new growth opportunities.
- Industry signals – you feel that existing business lines have limited growth potential
- Desired impact – you want to provide more opportunities to your participants and aren’t able to do so with your current state.
If one or more of these criteria apply to your organization, pursuing growth might be the right next step.
Explore your growth options
REDF typically distinguishes growth planning into four categories. Remember, you can execute on these growth options by either building internal capacity or partnering / buying external capacity.
Explore your mix of growth options in each category below:
- Opening a new sales channel and/or increasing sales to existing customers
- What it looks like: With your current business line(s), look for new ways to reach and sell to new customers and/or increase the number of purchases from existing customers.
- Example 1: Starting an online store when you previously only sold in-person.
- Example 2: Hiring a salesperson to reach a new segment of customers (e.g., B2B contracts).
- See here for a REDF primer on sales channels
- Selling new products and services within existing business lines
- What it looks like: Within your current business line(s), determine whether there are new products or services that could be launched to augment current offerings.
- Example 1: You are a landscaping business and look into offering gutter services as well.
- Example 2: You currently sell screen printed t-shirts and begin selling tote bags.
- Note: Often, expanding products/services offered can attract new customers – options A & B here are not exclusive of each other.
- Considering geographic expansion
- What it looks like: Replicating a successful business model in a new geography can open up new markets and customers, while leveraging your existing skills.
- Example 1: You currently operate a janitorial business in NYC and want to expand services to New Jersey.
- Example 2: You currently sell muffin mix in stores locally but want to reach retail stores across the U.S. So, you consider partnerships with stores that operate nationally (e.g., Whole Foods).
- Note: Consider where existing business operations might be successfully transposed onto a new setting, based on similar demographics, facility availability, team capacity, etc.
- Launching or purchasing new business lines
- What it looks like: Brainstorm potential new business line opportunities, starting with ideas that leverage your current capabilities.
- Example 1: You’ve become really good at janitorial services and are considering opening up a landscaping business line.
- Example 2: You sell organic home good products and purchase a small enterprise that makes and sells body care products.
Develop Internal Criteria / Goals
- Develop criteria / goals (financial, operational, and social / programmatic) that should be fulfilled in order to move forward with a potential growth opportunity.
- Example: Primary goals could include increased revenue, people employed, job skill development, or brand recognition
- If possible, set a measurable target for these criteria / goals.
- Example: “Grow revenue by 10%” or “Hire 20 more employees.”
- Below are a few criteria that REDF has seen commonly used by social enterprises.
- The goal here is not to have a ton of criteria. Brainstorm and choose which top 10ish you want to achieve based on why you are looking to grow.
- When selecting criteria, it is important to keep in mind that not all opportunities will meet all criteria. Instead, you are trying to balance what must be true to pursue a growth opportunity.
|Financial||Max Startup Cost||Startup & capital expenditure needed to start growth venture must be < $XYZ target.|
|Financial||# of Years to Breakeven||The business costs of the growth venture will be paid by the growth venture in XYZ time.|
|Financial||Industry Growth Projection||Evidence exists to show that there is market demand (i.e., customers willing to pay) |
and that demand is growing.
|Social||Target Population||Jobs are a good fit for the skills, experience, and needs of our target population.|
|Social||# of People Employed||Number of people employed (in steady state of growth venture) is between X to Y per year.|
|Social||Skills Development||Growth venture must help employees develop XYZ softs skills (e.g., time mgmt., accountability, professionalism, etc…) |
and XYZ hard skills (e.g., OSHA compliance and machine operation, potentially computer skills, etc…).
|Operational||Location of Operations|| Must be within XYZ city and surrounding counties; |
close enough to XYZ that participants do not need their own cars. OR XYZ miles to bus / train station.
|Operational||Shift Length||Hours worked per employee per week must be within X-Y hours.|
|Operational||Operating Expertise||Enterprise should align with internal expertise and provide synergies with existing businesses.|
For an example of what a final set of internal criteria can look like, see here for Hopeworks’ final criteria as they decided where to grow via geographic expansion.
Assess Growth Opportunities w/ Internal Criteria
- Use the criteria you developed in best practice #2 to assess each of the growth opportunities you identified in best practice #1. Consider the following activities when vetting your growth planning criteria:
- Primary/expert interviews – conduct interviews with other ESEs that are in the same industry as your growth opportunity. Use this information to size things such as the potential # of jobs created.
- Secondary research – spend time googling things or using A.I. just to see what comes up. You can also do advanced searches where you look for specific types of material (e.g., ppts). The act of googling stuff will also help you refine what questions you should be asking.
- Secret shopping – this is when you get quotes from similar businesses to help understand pricing dynamics in a given market. Secret shopping is okay when done in moderation; just don’t take any more time from the secret shopping org than you need to.
- If an opportunity does not meet your criteria, then it is probably wise to say “No” and table the idea for the time being.
- If an opportunity meets all / most of your criteria, then it’s time to do some more market analysis on the growth venture.
- Note: You may decide to weigh your criteria differently and have a few “must have” criteria and other “nice to have” ones.
Assess Feasibility of the market
- Analyze the market
- Determine the size of the relevant target market to decide whether the opportunity is large enough to justify the effort and resources necessary for expansion. The U.S. Census provides information on different industries by metro-area.
- Consider the customer segments that are likely to buy from your business and get a sense for their purchasing habits.
- Assess the competition
- Investigate how competitive the market for your new business line, product, service, or location is. Who would be your main competitors?
- Expanding into areas with less aggressive competition can ease market entry but may indicate the business opportunity is not as attractive from a profit standpoint.
- Assess other risks
- Consider risks such as substitution – will new technology make this product / service obsolete in the new future?
- Continue to assess whether this growth venture is a strong fit with the needs of your target population.
Pilot & test your growth opportunity
- PRIOR to dedicating significant resources to a growth opportunity, it is important to experiment and test whether there is indeed market demand.
- This experimentation should be low-cost and yield fast learnings on whether consumers want your product / service. This can look like:
- Developing a low-cost minimum viable product (MVP) – can you develop a few simple versions of your product and service and try selling them?
- Visiting & talking to customers – Is there a farmer’s market or other place in which you can talk with potential customers? Can you try selling your MVP and getting their feedback?
- For contract-based work, can you get a few pre-commitments? If you have a strong network of B2B supporters, are you able to have some businesses commit to purchasing your new product / service once you develop it?
- As you pilot and experiment, document learnings and collect data that supports making a go/no go decision on launching a larger commitment to the growth opportunity.
Develop a growth plan & projections
- IF an opportunity has met all / most of your criteria, the market looks good, AND you had a few successful pilots / experiments, then the next step would be to develop a robust operating and staffing plan for the proposed growth opportunity.
- This plan should cover the vision for how the growth execution should look like, your goals & assumptions, and how responsibilities & staffing will change to execute on the growth venture.
- It should also cover how you plan to finance this new growth venture and the next steps for securing that capital.
- When developing your plan for growth, consider whether you should build, buy, or partner on this growth venture.
- Moreover, this should also be supported by detailed & associated financial projections of how much you expect to spend & earn each year.
- Having this plan & projections will set your ESE up for a smoother execution of the growth opportunity.
- Hopeworks Case Study: see how a peer ESE used internal criteria to decide on a new location
Sales Channel: understand how to develop new sales channels in order to increase revenue.
- Break-even analysis: understand how adjusting your pricing affects the sales volume necessary to break even
- M&A: go deeper into whether a merger or acquisition would be the right path to growth rather than building internally.