Focus on Your Core Business for Profitable Growth
To create long-term business profitability, a company must invest in and strengthen its core business. We see businesses wither and die because they fail to do just that.
The biggest mistake that businesses make is they try to expand too far and too fast. Sure, expansion is great but it must be done slowly and in a calculated manner without sacrificing core business growth. Spreading out too fast will eat away at critical resources that the core business processes depend on, thus weakening the very foundation of your business.
Let’s take a look at how business profitability can be ensured by focusing on your core business.
Not Every Opportunity is Profitable
Business growth strategies must focus on strengthening the core of a business first. Only then must any form of expansion occur. We see failed businesses all of the time that did the exact opposite.
Blockbuster is one of the best examples of a company that lost touch with its core consumers. They refused to transition their core business to meet the demand that Netflix cashed in on. The demand started at mail-in movie rentals. Blockbuster had time to adapt but they refused. By the time Netflix started its digital streaming services, Blockbuster had already lost the battle.
Another example is Blackberry, which hit its peak at 80 million users. But then its competition started turning to touchscreen technology. Blackberry ignored this new technology and the demand from its core audience, ultimately losing market share to its competitors.
Business Growth Strategies That Work
Here are some ways in which businesses can achieve core business growth.
1. Optimize your Core Business
Optimization of core business practices means investing in deeper, stronger strategies. This is the fundamental practice of business profitability. It’s done a lot of different ways but the most common is investing in new customer acquisition and finding innovative ways to deliver your key products or services.
For instance, Netflix started as a mail-only subscription-based movie rental service. They saw that their core audience preferred the convenience of staying home so they dug even deeper into this market by starting a streaming service online, giving their customer exactly what they wanted – to be entertained in the comfort of their homes.
2. Extend the Boundaries of your Core Business
Expansion is also a necessary step for business profitability but the problem is that companies tend to expand too much all at once. Look at the business growth strategies of companies like Wal-Mart. They started as just a retail chain and have expanded into areas like grocery, photography, and even automotive. But those expansions didn’t happen all at once. They slowly rolled them out over decades.
So businesses should expand beyond their core but it must be done slowly. The general rule of thumb is to reinvest 10% to 20% of profits into extending the boundaries of the core business.
3. Reinvent the Business Core
The main reason businesses like Blockbuster and Blackberry fail is they refuse to reinvent their core business to meet new demand. Yes, reinventing a core business is unpleasant but there are times when it’s necessary. The ability to pull this off is usually what separates winning companies from those that fizzle out.
We’ve seen this more than ever with the COVID-19 pandemic. Businesses had to reinvent themselves to meet this unique challenge. Those that did are still thriving. Many of them are better off now because they found more efficient business processes by reinventing their core business or outsourced non-core functions.
When assessing new opportunities, it is important to determine whether it is worth the investment and if it feeds into business profitability. Ask yourself the following questions:
- Will this new opportunity strengthen the core of your business?
- Can your business become a leader in this new segment?
- Do you have to make this move as a defensive measure?
- Will this opportunity put your core business in a strategic position of longevity?
- What are the risks involved with this opportunity?
Ways to Achieve Core Business Profitability
Here are some time-tested strategies used by market leaders to boost business profitability through core business growth.
- Treading the waters of other demographics to acquire new customers for products and/or services related to the core business.
- Adding a new product or installing new features on current products. Apple Inc. is a very good example of this.
- Investing more in marketing to expand the reach and build brand awareness. This strengthens the core business.
- Adding more distribution channels to boost reach.
- Adding new price points. Right now, we’re seeing businesses offer lower entry-level price points to get new customers and then upselling to those customers.
Businesses must strengthen their core strategy to ensure business profitability in the future. Remember, it’s not all about the present. Successful businesses look to the future as well. The process should always prioritize strengthening the core business before attempting to expand. Once you are certain that the core business is strong, then you can open up new opportunities.
Consider outsourcing your non-core business tasks to a company like BackOffice Pro so that your in-house teams can focus their critical resources on core business growth strategies. Contact us today to discover how you can get started.
– Backoffice Pro