Companies are constantly monitoring their revenue. It is firmly believed that when the revenue growth slows down the enterprise is doomed forever. This has led to many business executives to focus on merely expanding their businesses and increasing their profits. But ultimately all growth comes to a standstill.
When faced with this dilemma of a stagnant income, businessmen often open new stores in the hopes of increasing revenue. Very few businesses actually focus on making operational and internal improvements. This strategy is not followed by most companies due to three reasons.
The capitalist economy demands growth
Slow growth is often shunned upon. When faced with declining growth companies are expected to go back to the drawing board and come up with a new strategy instead of making an internal improvement.
Companies never know when to make the transition
Many retail companies keep expanding their chains until they collapse from all the added expenditure.
Every company needs a different strategy
A growth company and a matured business, that has reached its peak, require different operating strategies. Companies that excel at growth lack the capabilities to make the switch.
Since slow growth is inevitable situation it is better to be prepared for a transition from a high- growth to a low- growth business strategy. This will help retailers to stay in the maturity stage of the life cycle for a very long time, forestalling decline. The following are some ways to make this transformation easier and effective.
- Use the right analytics
By tracking the right metrics business executives can detect when to transition to the maturity strategy. Studying the revenue from each store, the estimated revenue added per new store and the return on capital investment businesses will be able predict any shift in growth.
- Stop opening new stores
As much as retailers want to believe that expanding the business is the proper solution to a declining business, it is not so. Opening more stores might offer a temporary solace but eventually the prices rack up and the entire business might crash.
- Increasing the sales of existing stores
Through operational improvements a company can increase its revenues from existing stores faster than the expenses. This can be done in a few ways:
- Ramping it up
Companies can close unproductive stores, expand and remodel stores in the best locations, and carefully choose locations for the few new ones.
Many analytics tools are available today that help retailers decide what assortment of products to carry in what quantities, how to price those items, and how many sales associates should work in each store, at what hours.
- Product Development
Sales at existing stores can be improved by developing a new product or improving an old one.
Hire the right people and train them accordingly. Employees should also be provided with the proper incentives that make them more responsible.
- Allocate Capital Wisely
The available capital of a company should be allocated to the most promising initiatives. All new ideas that are generated should be properly evaluated before making the final investment.
The destructive obsession with high growth pervades virtually in all capitalist economies. Most companies do not see the negative side of high growth. But a slow- growth maturity plan is better for enterprises in the long run and ensures that the businesses run smoothly and effectively.