Technology, customer retention and business intelligence are fundamental to future SME survival. Here are four small business growth strategies.
Small-to-medium-sized enterprises (SMEs) know they need to take action to remain competitive and achieve future growth, a new report from Deloitte Access Economics – Digital Opportunities for Today’s Small Business report – has revealed.
All small businesses want to grow, but where is the best place to start? The reality is a majority of SMEs have limited resources and capital to risk on unproven strategies. For this reason, we worked with Deloitte Access Economics to find out the best ways that SMEs could set themselves up for even greater success in the future. The result is a number of strategies SMEs are prioritising to achieve growth in coming years.
I see far too many business owners who are worried about where their growth is going to come from, but they’re spending precious marketing dollars chasing new customers, all the while ignoring existing customers. It’s a perennial problem for big and small business – always trying to find a new customer while not appreciating the customers they already have, and working to extend those customers’ lifetime value. If a small business can extend the LTV of existing customers, turning them into repeat purchasers who advocate on the business’s behalf, they’ll be the SME’s best asset.
So it’s pleasing to see that the most-prioritised strategy for growth identified by SMEs in the Deloitte report is to retain existing customers – 60% of SMEs list customer retention as a key future opportunity, with 47% focused on increasing the amount each customer spends. Customer retention is a critical strategy for growth, but so is getting them to buy more from you – more often. If you can get previous customers to buy from you one more time a year, you’ve essentially doubled your business.
However, knowledge of those existing customers is key to this effort, and only 48% of small business owners say they have good knowledge of their customers. So, I challenge you to ask yourself a few questions about your customers:
How often are your existing customers buying from you?
What’s the average sale price?
What’s the average order size?
Where do your best customers come from?
Why do your customers leave / churn?
If you don’t know the answers, you shouldn’t be focusing your efforts exclusively on trying to acquire more customers. You should be doing everything you can to be more customer-centric: to gain insights about your existing customers and identify the best ways to get these customers to buy from you again. If you’re in a recurring revenue business, understanding why customers leave and reducing churn is key to growth – the fewer customers you churn, the fewer new customers you need to add.
Through the use of technology, you can learn existing customers’ buying patterns, predict what they might need from you next, and proactively share relevant and valuable content – all with the goal of getting them re-engaged and purchasing more from you, and recommending you to others.
And customers want this experience – they are actually demanding it. They want businesses to really know them – they don’t want to just be a number, they want to be treated well. And when small businesses become customer-centric, existing customers will shop with their loyalty, not based on who offers the best price.
When it comes to growth, one of the most difficult challenges you have as a SME is that you’re generally constrained by resources and capital (it’s harder to get loans to grow your business). Traditionally, small business has also been constrained by infrastructure – the tools and systems that run your business; i.e. point of sales systems, phones, computers, data centres, software, ERP, CRM, etc.
However, with all the technology advancements in the past decade, SMEs now have access to more tools and capabilities than ever before, which has levelled the playing field considerably with their larger competitors. As a result, technology has the ability to fuel small business growth.
Those embracing technology are making the absolute most of this ability – digitally advanced small businesses are experiencing quadruple revenue growth, according to a Deloitte study out of the US, while the revenue of Australian and New Zealand SMEs with CRM systems is 44% higher revenue than those with no system or basic systems.
So, technology has been hugely helpful in overcoming the traditional limitation of business infrastructure (systems and tools). And it can also help with capital constraints. Through the use of financial management technology, you can manage your business more closely, both in terms of cash outlay and receivables. You no longer need to track financials in an Excel spreadsheet, where it’s difficult to gain a clear picture.
Technology is giving SMEs a much better handle on their finances – making it easier to collect payments and secure finance.
I’ve already mentioned that SMEs may have a harder time securing finance for growth – this is partly because many don’t have the systems in place to build financial models to support a loan application at a bank. But that isn’t all – businesses also need to be able to clearly articulate the health of the business. For example, it costs X amount of dollars to acquire a customer and Y amount of dollars to service a customer, the average tenure of a customer, and, if they are in a recurring business, their churn rate. Being able to define these things is not only good when they are talking to banks, but it helps them make the right investment decisions with their precious capital.
These SMEs are in-tune with the health of their business and can also more easily identify problem areas before they become out of control, and what they can do to rectify them. For example, if the owner of a business that’s experiencing cashflow problems can see on their phone, in real-time, that their average invoice is paid in 70 days, they know that shortening that time can improve cashflow. In the past, this information would have come via bank and accountant records, and been difficult to piece together. The financial transparency that’s available now is a huge improvement.
SMEs need to consider how they can respond to the market and adopt new technologies to meet heightened customer expectations. Yet, only one-third of SMEs say they’re adopting innovation technologies as a strategy for growth.
If SMEs want to be smarter about growth, they most definitely need technology, as was shown above in both the US and Australia/New Zealand studies. If you want to really leap ahead of your competitors, and provide the best customer experience, it is almost impossible to scale high-touch services without the aid of technology.
There’s an entrepreneurial mindset of just winging it, mostly because that has worked in the past. But as a business pivots in size and complexity, you need to make the right investments to set the business up for future success.
In the Deloitte report, four in 10 SMEs listed being more efficient with business processes as a growth strategy. And efficiencies are great, as long as they don’t impact customer experience. Unfortunately, when making the business more efficiencient, many make decisions that unintentionally impact customer experience. Just because it may save the business some money, doesn’t mean it is the right decision to make.
Another growth strategy, for 36% of SMEs, is gaining new customers more cheaply. Again, I’d exercise caution here. It’s a better long-term business strategy to spend more to gain a more loyal, high-value customer – a blanket cost-saving attitude towards customer acquisition doesn’t encourage this.
Learn more about the digital trends impacting small business and the resulting opportunities for growth. Access the full Digital Opportunities for Today’s Small Business report.
Tiffani Bova is Global Customer Growth and Innovation Evangelist at Salesforce. Read more from Tiffani, including her recent interview with Naomi Simson, entrepreneur and judge of Shark Tank Australia.