A business’s growth plan is relatively simplistic when it is first starting up and usually consists of rolling out of a handful of products or services to a manageable geographic market.  It is not uncommon for the plan to be maintained solely in the heads and ideas of the business’s owner(s).  And believe it or not, this approach works for many businesses…at least until the business’s growth plan nears its maximum potential and begins to plateau. At some point, the new business will need to make a more serious assessment of its strategic growth plan and develop a clear path to achieving growth and incremental value for its shareholders. But this process doesn’t stop with the first draft of a plan. In fact, successful businesses make it a habit to periodically review the strategic plan and update it on a regular basis.

But what does it mean to develop a “strategic growth plan”? While there is no single approach to correctly developing a business’s growth plan, the following sections offer a framework that generalizes the processes and discusses a few of the critical path objectives required to developing and deploying a successful strategic growth plan. The following paragraphs may read like a linear process (and in some instances may be); however, the reality is that each component of the strategic planning process can be individually reevaluated and, if needed, redeveloped as new information becomes available. It is also important to realize that the results of this planning process are not intended to focus solely on the M&A aspects of growth (although an acquisition is a common result of this process), but instead, the results should allow for and document all of the various avenues an organization can pursue to achieve value.

 Characteristics of a Successful Plan

Before diving into the framework, it is worth noting a few of the primary characteristics of a successful growth plan. This is not intended to be a comprehensive list but it does contain a few of the components that are critical to the the plan’s success.

First and foremost, a strategic growth plan should result in actionable objectives, with a defined path to success. The end state should be clearly presented to the executors of the plan in a manner that creates a task oriented mindset. Without a plan for action any ideas created during the planning process will appear unattainable or wishful.

Secondly, a strategic growth plan should be flexible and agile enough to address the many complexities of a constantly changing environment. The industries a business operates in change over time and often provides valuable information. Technology and shifts in customer demands, for example, inform management of critical growth opportunities and should be reflected within the strategic planning process.  Without the ability to identify and rapidly shift a strategic objective, a business may react to “opportunities” that it may not fully understand, or worse, pursue opportunities that result in inadvertently acquiring stale or outdated technology.

Additionally, a plan should be supported.  Not only supported with relevant market data but also supported and reinforced by the organization’s management and its resources.  Without this support, the plan will not appear credible and its execution will be corrupted with insufficient effort.

A business’s strategic growth plan should include buy-in and ownership among the relevant team members, and ultimately, throughout the entire organization. Arguably, this could be one of the more difficult tasks to accomplish. Every organization has different management styles, but one key aspect of developing ownership in a plan is to identify and include key personnel in the decision making process as early as possible.  Generally, talented people are more likely to add value if they feel like they were part of the process.

With these characteristics in mind, we can begin to formalize a plan for growth and develop specific action oriented tasks that align the organizations overall growth objectives.

Strategic Growth: A Framework

Strategic Assessment

The first step in developing a growth plan begins with understanding (and occasionally modifying) the organization’s mission and objectives. Specifically, the intent is to address the reason(s) the business exists and any high level objectives the management team has identified.

From this point, the plan’s architects can begin to assess the macroeconomics of the general business environment as well as form opinions on the qualitative indicators of the specific industry that the business operates in (i.e. changes in regulation, technology, supply chain, etc.). Additionally, the planners should begin to expand its understanding of related markets to gain better insight into other areas the business can grow into.  The focus of this part of the planning process is in obtaining a high level understanding of the economic trends across the business’s current and related markets (ideally casting a wide net across a variety of possible opportunities), which will ultimately provide a foundation for more targeted screening assessments to occur in the next step.

Market Assessment

With the information gathered in the strategic assessment stage above, a more detailed market assessment of the specific areas of interest can begin. The process entails screening the entire list of potential markets and industry segments against a set list of criteria that aligns with the organization’s mission and objectives.

The first set of criteria focuses on the basic fundamentals of the previously identified markets.  Most organizations will begin by filtering each market based on a combination of its profitability, potential for growth and its overall size.  The following is a brief list of questions that should guide the screening process:

  • Profitability – How do the profits compare to the organizations current offerings? What do the margins look like if a new competitor enters the market? Are there any external factors that will improve (or impede) the margins?
  • Potential for Growth – What has the historical growth profile looked like over the past several years? Is it expected to change?  If so, what are the causes for this change? Or under what conditions can growth be sustained?
  • Size – What size should the organization focus on? Is the market big enough to effectively achieve meaningful results, but not so big that valuations are achievable.

The second round of analysis focuses on the market’s competitive landscapes. It is an attempt to gain an understanding of the participants, the likelihood of new competitors entering the market and the impact a new competitor might have on the landscape.

  • Market Participants – Who are the participants with in this market and how much of the market do they command? Is the market overpopulated with constant pressure on margins? Are the competitors meeting the market’s demands?
  • Barrier of Entry – Are new competitors entering the market? If so, have they had success or have they been met with resistance? How have new entrants positioned themselves within the market (i.e. low cost provider, focused on quality, etc.)? What resources would be required?
  • Impact on Competition and Customers – How would each competitor react to a new entrant? Would they react quickly to price changes or differences in quality? Are customers loyal to specific brands?

The results of the two steps listed above provide insight into specific opportunities within the targeted markets and allows for a comparison of the market’s competition against the organization’s capabilities and limitations. At this stage, the screening process begins to shift from an external focus to one that begins to assess the strengths (and weaknesses) of the organization and its ability to enter or expand into a targeted market, all while considering the threats that have been identified thus far.

  • Capabilities and Limitations – What strengths does the organization have over the competition? How do those strengths translate to a competitive advantage? Are there weaknesses or limitations that the organization will need to address in order to effectively penetrate the market.
  • Market Conditions – What are the optimal market conditions required for success? Do those conditions exist at this moment and will they continue (and for how long)?

As opinions are developed throughout the market assessment, the framework at this stage can reveal some early indications about potential approaches to entering or expanding into a particular market.

Investment Objectives

If conducted methodologically, the previous steps will have resulted in some initial conclusions about where best to deploy capital. At this stage of the planning process, the focus shifts to how best to achieve growth and value within the markets that have been identified up until now.  In this regard, there are generally two categories of investment objectives: Horizontal Integration and Vertical Integration. Each of these objectives should be analyzed for its potential to add value and compared along side the associated risks. The following provides some topics to think about when considering what investment objective(s) best align with the targeted markets.

Horizontal Integration

Horizontal integration can generally be viewed as an organization’s attempt to expand within its current market or expand into adjacent markets.  It specifically focuses on capturing new customers, either by adding new products/services or by adding new markets. The following are a few of the primary objectives related to horizontal integration or expansion.

  • Offering new products to existing markets – An organization should have a firm understanding of its core market and should, therefore, have an idea about were its portfolio of products or services falls short. If management feels that its core market has the capacity for growth, it will often deepen its grasp by offering additional products or services. This particular investment objective is often associated with a relatively low risk investment compared to the other objective noted below, especially if the new products or services are similar to current offerings in how they are produced, marketed and distributed.
  • Extending existing products to new markets – This objective is most commonly associated with geographic expansion and has the potential to add significant value to an organization. Successful execution of this initiative can directly capture new market share and typically results in new customers and revenue; however, the targeted market should be adequately screened for product compatibility.
  • Offering new products to new markets – Entering a new market with products or services outside the organization’s core offerings may represent the riskiest of the alternatives thus far.  If a new market or product moves too far from the organization’s core offerings (or is unable to draw on direct and reliable experience), the chances for success tend to diminish.  Organizations pursuing this objective should take into account the additional resources that may be required to execute successfully and adjust economic expectations accordingly.
  • Other objectives: Other objectives could include re-branding or re-purposing a product. In instances where the brand has become stale it is not uncommon for an organization to acquire or build a new brand. Occasionally, customer feedback may identify other uses for a particular product thereby creating an opportunity to present the same product to the market but marketed under a different use. Another possible objective include investments made to improve the organization’s infrastructure with focus on cost and/or process improvements.

Vertical Integration

Vertical integration is an organization’s attempt to expand into its supplier’s market (backward integration) and/or its customer’s market (forward integration).

  • Backwards Integration – The benefits of backwards integration include control of inventory management and quality and can assist in procuring a permanent supply of a critical component in the organization’s manufacturing process. Additionally, a supplier focused strategy can offer other upward oriented supply chain efficiencies that would otherwise be unattainable with existing supplier relationships. When analyzing this objective it is critical to understand the fixed costs associated with acquiring or building a supply side strategy and compare it with the variable costs that would be given up. Another aspect to consider is the competitive environment that is created between the organization and any suppliers it continues to use, specifically, the effects of the supplier’s pricing.
  • Forward Integration – When an organization pursues a forward focused integration strategy, it is attempting to secure direct distribution channels or end user customers. This strategy tends to yield better insight into the end customer and may yield actionable feedback to improve or better serve the customer base. Similar to backwards integration, a planner pursuing a forward integration strategy should compare and contrast the trade-offs in fixed and variable costs (for example, the costs to maintain and operate a distribution and sales center internally versus the fees associated with an outside sales or distribution agreement). Further, consideration should be given to the potential reactions of existing customers/re-sellers due to the appearance of previous supplier becoming a competitor.

Because this is not necessarily a linear process, the preliminary results thus far will have provided some indications about what investment approaches (and the priorities) that would be ideal for a particular objective. The next stage in this process is to identify and expand upon those investment approaches.

Investment Approach

The investment approach refers to the exact action the organization should take in order to achieve the investment objectives. The types of investments that an organization can make generally fall into to three categories. It can Internally Develop, Acquire and/or Strategically Align, all of which will be discussed in more detail below.

  • Internally Develop – This is often described as an organic growth strategy, which references an effort to use internal resources to expand into the targeted markets. Internally developing a product or service offers more control over its execution, including the initiative’s costs and timing. Organizations often choose this approach when the products it plans to offer are closely related to its existing product line and could easily leverage existing intelligence and processes. Products that move too far away from the organization’s core offerings may require additional expertise or research time in order to prepare the product for market.
  • Acquire – Acquisitions are an attractive alternative to internal development and the prior analyses of the targeted markets and the existing competition will have undoubtedly identified specific companies to acquire. A successful acquisition allows an organization to quickly enter a new market and is able to rapidly draw upon the acquired entity’s existing experience and acceptance in the targeted market. One of the secondary benefits of an acquisition is the immediate removal of a competitor from the targeted market (compared to developing internally which creates an additional competitors and directly expands the market’s supply side capacities). One of the disadvantages of an acquisition is the significant efforts an organization is required to expend to successfully verify numerous financial and operational assumptions of a targeted company in a seemingly unrealistic time frame.
  • Strategic Alliance – Another investment approach is to create an alliance with a strategic partner (normally in the form of joint venture or similar partnership). Partnerships offer a great opportunity to gain exposure to a targeted market while sharing some of the development risks and costs. Occasionally, alliances offer an opportunity for both parties to build a relationship in advance of a potential merger or acquisition (or at least to test the transactions feasibility). Organizations that pursue alliances should ensure that each party’s duties are clearly defined and revenues and costs are appropriately allocated. Unfortunately, strategic alliances are not a long-term solution to growth. Control of the partnership often becomes a point of contention and can cause an alliance to deteriorate quickly unless properly managed.

Process Results

Properly documenting and distributing the results of the strategic planning process is a critical step in the effective execution of the plan. These documents serve as the central point of information related to an organizations growth plan. It is recommended that the plan be as detailed as possible while still remaining flexible enough to adjust to new information received throughout its execution. As you would expect, the results should show each of the targeted markets and the agreed upon investment objective and investment approach(es). Ideally, there should also be an associated timeline for each of the objectives in order to establish a sense of action within the organization. Another document that will benefit the transaction team is a listing of the companies targeted for acquisition or strategic alliance and the investment objective(s) it intends to accomplish. The results of both of the documents should clearly articulate how each investment aligns with the organization’s mission and objectives and how it ultimately creates value for the shareholders.


There is no turnkey solution when it comes to developing a growth strategy. Each organization and industry will have its own unique process; however, the above documented framework provides some guidelines to begin critically thinking about a strategic vision for the future. To truly capture its effectiveness, the strategic growth plan should be regularly updated and distributed to all members of the organization.  And with the appropriate support and buy-in at all levels, the organization will begin to realize its true growth potential.