Every business wants to grow. Growth means more clients, more money and more market share. But how exactly does a business grow? The first step is to understand the types of business growth. Each company is unique, but all expansion falls under two general categories: vertical and horizontal. Vertical growth occurs when the company digs deeper into its primary business by achieving superior results, greater efficiency and better customer satisfaction. In short, you get better at what you do.
Horizontal growth occurs when the company expands sideways into new products and services. Instead of building up and improving the principal business and all the elements supporting it, the company devotes its resources to diversifying into other businesses or new markets that may or may not be related to its current work. An example would be a car company that, instead of selling more and better cars, expands into selling apparel or books.
Depending on a company’s unique circumstances, one or both types of expansion may be the best option. One mistake often made is expanding horizontally before the vertical work is done. Many are so adept at recognizing new opportunities that they become more interested in new products or services, serving totally different markets, and neglect their underlying business. These new mini-ventures often require totally different strategies and sometimes even different management styles, to say nothing of the extra financial resources needed. While they should be focusing on building up their client base and improving the quality of their products, these companies get distracted by pushing branded t-shirts and bumper stickers.
For the large majority of small businesses, vertical expansion is the way to go. At best, horizontal expansion is a distraction, and at worst, it can break the bank. Once a small business has established a name for itself and enjoys a loyal clientele that recognizes the brand, then they can think about t-shirts with the company logo. But vertical growth should always be a priority.
