Internal & External Business Growth Strategies

A business that is not growing is destined for tragedy. Whether you run a small business on Main Street America, or you are the CEO of a Fortune 500 company, for your business to survive it needs to have a specific growth strategy. According to Knight A. Kiplinger, the author of Fast Track Business Growth, there are two separate types of business growth strategies: internal and external growth. Integration of both internal and external growth strategies is crucial to the overall development of a business and continuously increasing revenues.

  1. Internal Growth

    • Internal growth is a strategy to develop the base or capabilities of the business itself. In other words, many businesses will reinvest in employee development, departmental restructuring, or enhanced product offerings in the hopes of providing a broader base on which to provide services/products to customers. Internal growth does not produce immediate revenue increases and may actually require an input of revenue to be paid off over time, but internal growth promises the potential for future returns on investment. Internal growth strategies do not necessarily increase the size of the business.

    External Growth

    • External growth strategies develop actual company size and asset worth. External strategies focus on strategic mergers or acquisitions, increasing the number of mutual relationships through third parties, and may even include franchising the business model. The larger the number of business partners and/or franchisees, the greater the networth of the company and throughput of cash. The goals of external growth strategies are to provide larger opportunities to increase the worth of the company, and for this reason external growth strategies tend to produce immediate return on investment.

    Integration Strategies-Service Industry

    • Service related businesses should focus their internal growth strategies on increasing personnel and developing advancements to increase the amount of work that can be done in a set amount of time. As services are normally billed hourly or on a job by job basis, the ability to perform more jobs in less time is what can increase the earning potential of the company. An external growth strategy that could then be implemented for a service business is to outsource some of the work and operate as a general contractor. This provides more resources to continue to perform work that your company excels at, yet not forcing your personnel to be bogged down by additional work.

    Integration Strategies-Sales

    • Sales-related businesses or product-related businesses should focus their internal growth strategies on developing internal company infrastructure and new product offerings. Sales are the only way that product/inventory based companies bring in revenue, so providing infrastructure that assists in winning new clients and providing new products to entice new customers are the best internal strategies for these businesses. Integrating franchising into this growth plan is one of the best business models to have, as the franchise provides the influx of capital to continue to develop new products and increase the overall infrastructure of the organization.

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