Friday, June 12, 2015

About Business Growth

If we ever think of doing business, we shall think to make it big. But, we can't make it big in short time, so we have to think long term. In order to make a business to be long term, it has to be the business which is talking about future. In business, we call it "sustainable". So, the question: what kind of business model is sustainable?

When we talk about business, we talk about how do we earn money, we talk about "profit". That is the bottom line for a business to be sustainable. Because only with the profit, we can grow our business. We want the "growth".

Why is "growth" important? In the business world, there exists "competition". Even if our business model is the "first in the world" today, it may not be tomorrow. We will always have competitors to join us, grab some market share from us. Moreover, the market is big, it's worldwide. No one is going to provide them all. So, don't be naive, accept the fact of facing competition.

"Growth" means "gaining popularity". In a town of 100,000 population size, we try to maximize the number of people knowing our business, use our products, or our services.

For example, we open a barber shop. 10,000 people in the town know us, like our service, and visit us every month. We have this stream of loyal customers. Through power of  "mouth to mouth", more people know us. More visitors are coming. But, how are we going to provide the same service to 20,000 people? We have to recruit more staffs on board to serve them. That is growth.

"Growth" means "gaining market share". If today, our town have a new barber shop providing the same service. Today, we can support 20,000 people. The new barber shop is supporting another 20,000 people too. We are supporting 40,000 people in this town. We both having 50% of market share.

In order to gain more market share, we have to increase our sales in two ways. One, do marketing, introduce to another 60,000 people who yet to know our service. Two, provide better service than the new barber shop and get some of their customers to us. By getting 20,000 more new visitors, we have 40,000 visitors and the new barber shop only have 20,000. We have 67% of market share and they only have 33%. If we improve our quality of service and provide better than the new barber shop, we get 10,000 customers from them, and we have 50,000 while they only have 10,000. We have now 83% market share and they have 17%.

Next, "Marketing" and "quality of service" come into play....

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