Sorting Your Offers Into Four: The BCG Growth-Share Matrix and Its Limits for Small Businesses
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A table for deciding where your time goes
The growth-share matrix sorts several products or businesses along two axes, market growth rate and relative market share, to help decide where money and time should go. Bruce Henderson, who founded the Boston Consulting Group (BCG), popularized it around 1970.
If you have more than one offer, you must decide which to build and which to drop. The matrix gives you a way to organize that decision. Parts of it fit small businesses poorly, and the last section covers those.
The four categories
The vertical axis is market growth. The horizontal axis is your share compared with the largest competitor.
- Stars: high growth, high share. They need investment to keep up but may become your mainstay.
- Cash cows: low growth, high share. They need little investment and generate steady cash.
- Question marks: high growth, low share. Investment might turn them into stars, or might not.
- Dogs: low growth, low share. They earn little and are candidates for being dropped.
The central idea is the flow of money: cash from cash cows funds question marks and stars.
Applying it to a solo business
Measuring share exactly is hard for a small business, so use substitutes.
- Instead of growth: whether inquiries or searches in that area are rising, flat, or falling
- Instead of share: the portion of your revenue the offer represents, or how often you are chosen in that area
Say an independent instructor offers a course, one-on-one consulting, and downloadable materials. A course that brings most of the revenue but draws fewer inquiries looks like a cash cow. Consulting with rising inquiries but small revenue might be a question mark.
Use the result less to decide what to keep and more to reallocate time. For example, streamline the cash cow's routine work, then spend the freed time developing the question mark.
Limits for small businesses
First, if you have only one or two offers, a four-way split adds little. Looking directly at each offer is faster.
Second, the assumption that higher share leads to higher profit came from BCG's experience and does not hold in every industry. Share also changes sharply depending on how you define the market. Having a high share of a niche still yields limited income if the niche is small.
Third, an offer labeled a dog may serve as an entry point to other offers or support a key client relationship. Cutting it bluntly can lower other sales.
Decide these before building the table
How you draw the market boundary changes the result. Your sense of share differs depending on whether you look at all web design or web design for restaurants. Use the set of options your customers actually compare you against.
Reviewing every six months or so is enough. Looking monthly means chasing noise in the numbers.
Do not let the table make the decision
The table is a starting point for discussion, not a conclusion. Deciding mechanically, "invest because it is a question mark" or "drop it because it is a dog," leads to mistakes.
Before investing, look for a reason from customer feedback that the offer could grow into a star. Before dropping, check whether anyone still uses it and whether those customers also buy your other offers.
An alternative for small portfolios
If you have few offers, listing profit, time required, and outlook for each is enough in place of the table. A job that takes a lot of time for little profit is a candidate for a higher price, fewer steps, or dropping.
An example of using the result
Streamline work on the offer closest to a cash cow, then use the saved time to collect customer feedback on the offer closest to a question mark. Continue for three months and see whether that offer has changed. Even a modest shift in inquiries or repeat orders tells you something.
What to do next
- List every product and service you offer. Three or more gives you enough to compare.
- For each, note whether inquiries are up or down and what share of revenue it brings.
- Write a tentative guess at which category it is closest to.
- For anything that looks like a dog, check whether it leads customers to other offers.
- Pick one cash-cow task to streamline and decide how to use the time you free up.
If dropping an offer or changing a contract is involved, consult a professional.