Initiatives to Kickstart Organic Growth

June 1, 2015 Brian Beattie

Last week’s post dealt with ways software companies can kickstart organic growth through ‘Initiatives’.  As brief reminder, at Volaris, we define Initiatives as specific projects that meet the following criteria:

  1. Can be measured separately from the rest of the business
  2. Involves doing something different
  3. Has someone in charge
  4. Can be cancelled

Not only are Initiatives an investment in the company’s future, but potentially also a way to diversify —mitigating risks associated with having all eggs in one proverbial basket.  Initiatives can focus on new or existing customers, and new or existing products:

Selling existing products to existing customers

There are two ways to grow in this category – price increases and add-ons/modules:

A company can raise prices, which leads to more revenue from existing customers. However, it is generally not sustainable as one cannot raise prices by large amounts year after year without causing a customer rebellion.

A more viable option is to sell existing add-ons/modules to existing customers. For businesses that have a varied product suite, gaining a larger share of wallet amongst its customers can be a viable goal. However, for many companies, there are too few add-on modules and too few customers who haven’t already purchased them to drive substantive organic growth.

Develop a new product for existing customers

Typically, new product Initiatives focus on building an add-on module for a new user base at a specific customer. Due to the vendors’ existing relationship with their customers, this is a very credible way to kickstart growth. From the customers’ perspective, new add-on modules from an existing vendor come with less risk, as they are easier to integrate, and operationally less disruptive than a competitor’s product.

Sell existing products to new customers

The most common Initiatives of this type is selling an existing product into a new geography (e.g. selling a North American product in Europe) or selling into a new vertical market (e.g. selling a transit product to the taxi industry). However, selling to an entirely new customer segment tends to be harder and more expensive than developing new products. Competition is more ferocious, and the incumbent has a distinct advantage as they are more familiar with the market.

Sell new products to new customers

If they are successful, these Initiatives tend to be “home runs”. However, they are also the most likely to fail. The investment can be quite significant, but by putting the right processes and sense-checks in place (ie. Financial models, special interest groups, market research, etc.), substantial rewards can be reaped.

In Conclusion

At the end of the day, relying on your existing product and your existing customer base is a recipe for stagnation or decline. It is important to consider what the next step for your company will be if you want to sustain your company’s position in the market, and its ability to grow.

Your Turn

How does your business work towards organic growth? What are some of the best practices that your business uses to ensure initiative success? Please let us know in the comments section below.

About the Author

Brian Beattie

Brian Beattie is the Chief Financial Officer at Volaris Group. Besides overseeing the financial health of the company, he works closely with Volaris’ legal and M&A team on all new acquisitions. Brian is an expert on every stage of the M&A process – from sending out the non-disclosure agreement to executing the sales purchase agreement.

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