If you’ve ever gone down a marketing rabbit hole, you will have heard the phrase ‘content is king’ ad nauseum. Strategic growth has its own king (or I dare say queen) in the phrase “customer is king”. This rule of thumb isn’t shouted from the rooftops as frequently as its’ marketing sister. But it is just as, if not more important.
There are several key components to an effective growth strategy. But above all are the customers and the sales they generate for your business. Especially true if you are a social impact entrepreneur looking to create positive change for people or the environment. The social impact entrepreneur ideal is to create a model in which doing well equates to doing good. Rather that an increase in sales translates to an increase in impact.
Based on this gold standard, we’ll consider clients, human resources, and capital raise. In that order. They´re three major components of a growth strategy for impact entrepreneurs.
As mentioned, the ‘customer is king’. This seems a bit obvious. But often entrepreneurs get caught up in a myriad of other activities. They end up losing sight of the one thing that can make or break their business: the customer. Every entrepreneur should know the ins and outs of their customers. This includes who they are. What they like, what they don’t like. What their purchasing power is, where they hang out, and so on. This knowledge doesn’t come overnight. It can shift along the way. But if you are listening to customers, analyzing your sales data and observing the actions of potential markets, then you are one step closer to mastering the most important growth strategy.
Not just because our Strategic Growth Bootcamp includes it. But a key strategic tactic is to focus on customer indicators that allow for smart decision making. Ultimately increasing customer sales and impact. The principal key indicators we measure (and strive to improve) are no secret. Customer lifetime value (CLTV), customer acquisition Costs (CAC), customer retention, frequency of purchase, and average order value.
- Customer lifetime value. The total value of one customer or of a cohort of customers over the life of their engagement with your company
- Cost of acquisition. The marketing and sales costs associated with converting one individual or a cohort of individuals into paying customers
- Customer retention. The time a customer stays with you as a paying client, their repeat purchases
- Frequency of purchase. The number of times in a given period that a customer makes a purchase from you
- Average order value. The average ticket size of a customers’ purchase
Analyzing all of the above indicators for each client segment that your business targets, will allow you to make informed decisions about where and how to spend your time and money. For instance, your customer retention numbers for individual clients could be low. This suggests the need to invest more resources in customer service and solving potential issues with individual customer unhappiness. Similarly, a low average order value from your PME customers might suggest that you can try upselling or cross selling techniques to nudge the average higher.
Each entrepreneur will need to craft their own customer capture and retention strategies based on the above key performance indicators. Using customer tracking and analytics mechanisms are instrumental to assessing what is and what isn’t working with customers. At the end of the day, this will be a bit of trial and error. However, in the service of learning what your customers really want from you and what they respond to.
Since the “customer is king”, it’s only fitting that you spend the resources needed to keep them happy.
We all know that a startup team is important. But I would argue that we do not give it enough intentional attention. Human resources are a major component of any good growth strategy. It takes people to do the things your business needs to get done (even for tech companies). Describing the merits of and tactics for creating strong teams that can drive an enterprises’ growth warrants its own blog post. So suffice it to say that every good impact enterprise must focus on building the right team and cultivating its’ growth.
Seed and Series A impact investors repeatedly tell us they focus on the strength and entrepreneurial gumption of entrepreneurial teams when making decisions about deals. It is therefore not only important for your company’s organic growth to focus on this aspect. But is also important to be able to access our third strategic growth tactic: outside capital.
Given the flashiness of a raise, it’s tempting to measure your success as en entrepreneur based on capital raise. This is however misguided. Not all social impact entrepreneurs need to raise capital and not all need to raise it right now. Each entrepreneur should very carefully consider why they want to raise, from whom, and for what. The answers to these questions may end up guiding the entrepreneur towards a decision to buckle down on sales instead of spending time on fundraising.
If in fact you have determined that raising capital is the single best way to propel your company and the impact that it creates forward, then jump in! Fundraising is a time consuming process, but if done correctly it can reap major rewards for the business. Generally, aligning with investors who understand and care about impact will be a key part of this growth strategy. Engage with a mentor, expert, or attend one of our Investment Preparedness Bootcamps to learn how to model your capital ask for maximum impact.
Key considerations to keep in mind when using the growth tactics of capital raise are:
- Timeline of capital raise
- Amount needed
- Type of capital most appropriate to your model and plans (equity, quasi-equity, patient debt, convertible note, grant, etc.)
- Strategic use of capital
- Impact the capital will allow you to create
- Character and involvement of investors
- Networks the capital can open
- Sustainability of your model
- Exit potential (if applicable)
There are 101 ways to grow a business. But alas, there are no magic formulas that you can follow to ensure you get there. That being said, a laser focus on customers, your team, and raising the right capital at the right time is a big chunk of the battle. If you focus on these aspects, you will set yourself up for growth, sustainability and the creation of social and environmental impact.
Also, there is no shame in asking for help, so join one of our Bootcamps and spend a dedicated 3 days to designing and implementing strategies for growth.
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