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After five years in business, a coffee shop owner had a line out the door every Saturday, but her sales had stopped growing.
She came to me with a few ideas for how to get them moving again. She could open a second location, add a breakfast menu, or spend more money on advertising. Each option would require business financing.
I've spent my career helping small and midsize businesses secure financing. The biggest mistake I see is business growth strategies that don't align with the reason growth stalled.
I worked with the coffee shop owner to dig into her sales. Even though Saturdays were packed, weekday mornings were empty. Adding a breakfast menu was just the solution to draw customers in during the week, and equipment financing gave her the kitchen gear to make it happen.
Below, I'll go over the main business growth strategies for small and midsize businesses (SMBs). We'll cover paths to market expansion and a worked example. If you already know the type of financing you need, you can apply today.
| Strategy | What it means | Risk level | Typical cost to fund |
|---|---|---|---|
| Market penetration | Selling more of what you already offer to your current customers | Low | Email marketing, digital marketing, promotions, and extra inventory or staff |
| Market development | Selling what you currently offer to new customers or in new places | Moderate | A lease or buildout, new hires, and local marketing |
| Product development | Selling something new to the customers you have now | Moderate | Equipment, training, and launch marketing |
| Diversification | Selling something new to new customers | High | Largest budget of the four; longest time before revenue |
| Acquisitions | Buying another company | Moderate to high | Purchase price, legal fees, and transition costs |
| Strategic partnerships and joint ventures | Working together with another company | Low to moderate | Legal fees and your share of joint costs |
Understanding Common Growth Strategies
One of the most common ways to think about business growth is Igor Ansoff's growth matrix, or a product expansion grid. Ansoff was a mathematician and businessman, and his matrix sorts growth based on whether you sell new or existing products in new or existing markets.
| Existing products | New products | |
|---|---|---|
| Existing markets | Market penetration Sell more products to customers you already know. A low-risk move that usually means new marketing, sharper pricing, and poaching customers from competitors. | Product development Sell a new product to customers you already have. This works because you already have customer loyalty. |
| New markets | Market development Take what you already sell to new customers. This could mean a new town or a new type of customer. | Diversification Sell something new to a new group of customers. This is the riskiest move of all four, because you’re learning both a new product and a new market. |
Ansoff's matrix leaves out another way to build your business: strategic partnerships and joint ventures. Acquiring another business is a quick way to expand your business compared with building it from scratch.
Diagnose Why Growth Stalled Before You Choose
The business owners who grow the fastest spend some time diagnosing their business challenges.
Here are a few strategies that can help you figure out what is stalling your growth.
Talk to former customers
Contact the people who stopped buying. Ask them why. Their answers may point to a customer experience issue you can fix easily.
Split your customer base into segments
Group customers by size, industry, location, or how they found your business. If one or two customer segments are driving your revenue growth, focus your effort on those consumers, or think about how you can expand to new segments.
Check your sales funnel
Review lead counts and conversions from your customer relationship management (CRM) system. If leads come in but don't close, you may be looking at an issue with your sales team or a pricing issue.
Review your operational efficiency
Understand your margins, average order size, and how much each customer typically spends. This can give you a better idea of where you might be losing money.
What Your Numbers Might Be Telling You
Here are a few specific scenarios that I see coming up often for small and midsize business owners. If any of these sound like your business, here's what I've seen work for others.
Repeat customers buying less frequently
This may be due to an issue with customer experience or customer loyalty. Survey some of your regular customers to understand why they are buying less often.
Repeat business, but few new customers
This is sometimes because your brand isn't well known. Or it could be because of a poor lead generation process. Use digital marketing and search engine optimization (SEO) to create brand awareness.
Leads come in but don't close
The cause of this problem is typically the price point of your product or service. It may also be an issue with differentiation or with your sales process. Start by reviewing your sales data to understand where customers drop off.
You can't keep up with demand
It's time to expand. Consider buying additional equipment, hiring more employees, or opening a second location.
Your core market has stopped growing
This is often a sign that your marketplace is becoming too crowded. It may be time to expand into a new market or develop a new offering.
One customer brings in the majority of your revenue
This is risky, especially if an issue arises with this customer. Start to think about strategies for diversification, either by adding more clients or other services.
Eight Market Expansion Paths
There are several different strategies that fit for market expansion. It's important to pick a path that fits your existing business model, your competitive advantage, and your current cash position.
Here are eight market expansion paths that I see most often.
Open a new location
This fits when you've reached full capacity at your present location and have identified an unmet need in a nearby market.
Reach a new customer segment
This fits if your offerings align with a new customer segment that you haven't targeted yet.
Add a sales or distribution channel
This fits if your customers already buy products like yours through other channels. For example, if you only offer in-store buying and customers frequently make purchases online.
Launch a new line of business
This fits if your existing customers are asking for a related service that you can easily provide.
Franchise or license your model
This fits if you're already operating a profitable business at multiple locations. The business should already be repeatable and well documented.
Form a joint venture or strategic partnership
This fits if you want to try out a new target market without taking on all of the risk yourself. Teaming up with another business lets you split the cost while remaining independent.
Sell into new markets
This fits when you're already getting business inquiries from outside your current market.
Buy an existing business
This fits if another company has customers or capabilities that you don't and you have the money and the resources to finance an acquisition.
It's best to run a pilot before you make a decision. Gather market research from real sales and test different target audiences. This will tell you which growth opportunities align with your business.
How an Auto Repair Shop Puts Growth Strategies To Work
Picture an independent shop with repeat customers and a waitlist. Even though customers are coming back, new customer counts have stalled.
Let's take a look at how this auto repair shop could put growth strategies into practice.
| Strategy | What it looks like at the shop |
|---|---|
| Market penetration | Ask happy customers for reviews. Keep the shop's Google listing updated so it can reach people nearby. |
| Customer retention | Send oil change reminders by email and text. Give a free oil change after five services. |
| Upselling | Use digital vehicle inspections to show customers worn parts so they understand why a repair is needed. |
| Operational efficiency | Invest in shop software to help technicians cut down on paperwork. |
| Market development | Offer maintenance deals to local businesses that work with trucks and vans. |
| Product development | Add service for hybrid and electric cars as those vehicles age out of warranty. |
| Strategic partnerships | Build referral deals with local tire shops, towing companies, and dealers. |
Visibility and retention are much cheaper than product development. Start small and experiment over time. Small steps fund the bigger ones.
How To Build a Growth Plan in Six Steps
Choosing a strategy is just the beginning. The next step is developing your growth plan. Download our complimentary business plan template to help you get started on creating your growth plan.
Step 1: Assess where you stand
Conduct a SWOT analysis to identify your strengths, weaknesses, opportunities, and threats.
Step 2: Set SMART goals
SMART goals are specific, measurable, achievable, relevant, and time-bound. A sample SMART goal would be increasing revenue in a new geographic area by 15% in 12 months.
Step 3: Research one strategy
Do market research to learn about the demand for your offerings, price elasticity, and your competition within the target area. Verify your findings using financial data from your company.
Step 4: Assign owners and deadlines
Develop a list of concrete tasks that reflect your strategy. Select someone on your team to lead the project and establish quarterly milestones.
Step 5: Model costs and returns
Estimate the ongoing expense, income, break-even point, and cash flow requirements with your chosen strategy.
Step 6: Pilot, measure, and scale
Before you commit, test your strategy with a pilot program. Track your metrics, and once you meet targets, launch it on a larger scale.
How To Finance Business Growth
Business financing is one way to support your growth. Below, I'll cover the types of financing available through Clarify Capital's lender network and how each can help with expansion.
| Type of financing | What it will pay for | Key details |
|---|---|---|
| Short-term business loan | New location, buildout, or major hire | Clarify's lender network provides loans from $10,000 to $5 million. APR starts at 6% for qualified borrowers. Repayment terms run from 6 to 36 months. Funding can happen as fast as same day. |
| Equipment financing | Machines, vehicles, tools | Finance up to 100% of the equipment's value. The item serves as collateral. APRs start at 6% for qualified borrowers. Repayment terms range from 12 to 72 months. Financing becomes available 1 to 5 days after approval. |
| Business line of credit | Seasonal fluctuations in inventory and testing new marketing strategies | A revolving credit line up to $5 million. Interest is charged only on the amount you use. Repayment terms run from 6 to 36 months. Funding can happen as quickly as same day. |
| U.S. Small Business Administration (SBA) loans | Purchase of competitors or related businesses | Borrow up to $5 million. SBA loans have repayment periods of 10 to 25 years. Funding generally takes 30 to 90 days. |
| Merchant cash advance | Fast cash for inventory or a marketing push when card sales are strong | Advances up to $5 million. Factor rates range from 1.08 to 1.45. Repayment is taken as a percentage of the business's future sales. Funding can happen as soon as the same day. |
| Invoice factoring | Covering cash gaps while you wait for customers to pay, or taking on larger contracts | Advances up to 100% of the invoice value. Fees range from 0.5% to 5% per invoice per month. Funding can land in one to two weeks. |
| Home equity line of credit (HELOC) | Larger long-term growth projects for business owners with home equity | Equity in qualifying real estate determines how much you can access. HELOCs run up to $750,000 with interest rates as low as prime. HELOCs may have terms up to 30 years. Financing can land as soon as one week. |
Here's how those options line up with the strategies above.
| Growth move | Financing that can fit | Why it can fit |
|---|---|---|
| A marketing push or a customer retention program | Business line of credit | You draw on only what you spend and pay interest only on the amount you use. |
| Opening a new location or expanding into a new space | Short-term business loan | One lump sum with a set repayment schedule for a specific period of time. |
| Adding new equipment or increasing production capacity | Equipment financing | The equipment acts as collateral for the financing. |
| Launching a new product or service | Short-term business loans or a business line of credit | Keep the lights on until new sales generate enough revenue to support the additional expenses. |
| Purchasing another business | SBA loan | Take advantage of longer loan terms, which provide you with more flexibility in spreading out a large purchase price. |
| Entering into a joint venture or partnership | Working capital loan | Fund a portion of your setup costs and initial marketing efforts. |
Minimum Qualifications
For Financing Through Clarify Capital
$10,000 in monthly revenue
Your business must earn at least $10K per month in a business bank account.
500+ credit score
You can get approved with any credit score. But the better your credit rating, the better interest rates lenders offer. Your FICO score should be above 500.
Minimum six months in business
Your company should be operational for a minimum of six months. This shows business lenders that your company is sustainable and won't go out of business.
Have a business bank account
Your Clarify advisor will need three or four months of your most recent bank statements to verify income. This is just to see you're actually making $10K+ month in revenue.
Working With Clarify Capital
Clarify Capital connects small and midsize businesses with our network of 75+ vetted, reputable lenders across 7+ financing types. We've financed 50,000+ businesses across 1,000+ industries, with $1B+ in total financing.
When you apply, you work with a lending advisor, a real person based in the U.S. You won't be routed to a call center or chatbot. Your lending advisor will look at your business plan and tell you what financing options fit. That approach has earned us a 5.0 Trustpilot rating, the highest trust rating in the industry.
Step 1:Apply online
It takes about two minutes. You'll need your business's legal name, EIN, time in business, monthly revenue, requested loan amount, owner contact information, and a credit authorization.
Step 2:Connect with a lending advisor
A U.S.-based Clarify Capital lending advisor reviews the application, runs a soft credit pull (no impact to your score), and requests 3 to 4 months of recent business bank statements.
Step 3:Get matched and funded
Clarify Capital works with 75+ vetted lenders and matches your profile with the right financing. Approvals often get a same-day offer (SBA loans can take longer).
Finance One Move at a Time
The best small business growth strategies start with reading the numbers. Understand why your growth is stalling and pick a strategy to address it.
Then choose a financing option that matches how fast the investment pays back. When you're ready to put a plan into motion, Clarify Capital can show you what you qualify for. Checking your options won't affect your credit score.
Frequently Asked Questions
What Are the Four Main Strategies for Business Growth?
The four main strategies are market penetration, market development, product development, and diversification. These come from Ansoff's growth matrix.
What Are the Stages of Business Growth?
Neil Churchill and Virginia Lewis developed one of the earliest and most well-known models of business growth development, which includes five stages of business growth: existence, survival, success, take-off, and resource maturity. All stages require that companies develop unique financial systems, employ the right staff at the right times, and secure funding as necessary to sustain their current status or continue to grow.
What Are the Top Business Growth Strategies?
For small businesses, there are several common strategies, including customer retention, using digital marketing and SEO, creating new offerings, opening new locations, engaging in joint ventures or partnering with other businesses, and making an acquisition. While retention and digital marketing typically are the lowest risk and least costly methods for business growth, acquiring another company or diversification may provide faster increases in revenue. That said, both of these alternatives require larger amounts of capital and long-term strategic planning.
How Do You Finance Business Growth?
Most businesses use a combination of money from their business bank account and external sources to fund their expansion plans. Large-scale moves like opening a new store or acquiring another business require substantial forms of financing, like short-term business loans, equipment financing, and SBA loans.
How Does Clarify Capital Protect My Information?
Clarify follows SOC 2 security principles to protect the information you share during the application.
Michael Baynes
Co-founder, Clarify
Michael has over 15 years of experience in the business finance industry working directly with entrepreneurs. He co-founded Clarify Capital with the mission to cut through the noise in the finance industry by providing fast funding and clear answers. He holds dual degrees in Accounting and Finance from the Kelley School of Business at Indiana University. More about the Clarify team →
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