Although growth can be beneficial for a business, it is not always a defined concept. While expansion can lead to increased sales and a stronger market position, the question of whether or not growth is good for business resonates.
Data points used to highlight company growth include:
- Number of customers
- Number of employees
- Value of a company
Conflicting metrics used to measure growth can muddy the waters. Companies may see improvements in some of these metrics but not in others. For example, revenue can increase without a growth in the number of customers when gains are the result of existing clients buying more products. It is also possible for one metric to increase while another falls, such as sales growth resulting from a reduction in the price of a product.
All of these factors make it difficult to define growth but companies looking to expanding should define their business goals from the outset. This will help them to establish important growth metrics. Learn more about a business growth accelerator and how they can HELP your business.
For some start-ups, this could translate into increasing their customer base, even if it means suffering losses in the early growing phase. Less ambitious businesses could benefit from slowly increasing sales and revenue to ensure an income stream to help cover costs.
The importance of growth for small businesses
The type of growth required by a company is dependent on the stage of its development. In other words, while start-ups need to cement their position in the market, more established companies may need to protect against future risk by adopting a slow liquidity building process.
Start-ups usually need to grow to a size large enough to generate sufficient revenue to cover costs and to make a profit. Mature companies may still want to increase profitability by increasing sales.
What are the growth drivers?
Companies wishing to achieve organic growth have to adopt systems known to generate growth. The growth drivers are:
Motivation and people with the ability to drive growth
- A growth-driven business owner can become the driving force behind company expansion.
- Identifying motivated employees, such as managers, who have the expertise to head a growth programme, is an important aspect for future
Growth strategy prioritisation
- Although people will remain as the driving force behind growth, a strategy needs to be put into place to propel the business forward. This could entail developing a bigger customer base, introducing more products, or entering new marketplaces.
Infrastructure and processes to facilitate growth
- Once a company has appointed people to drive growth and has introduced a strategy that prioritizes the growth target, processes need to be adopted to facilitate the planned expansion. This could involve using automation software to streamline processes, or expanding warehouses to store the increased amount of stock that will be required as a company grows.
While a company needs to expand, the business must keep track of its growth rate. If an owner knows that his customer base will increase by 10% within the next six months, they can begin to implement structural changes such as buying new equipment or hiring more employees.
There are said to be four stages of business growth - start-up, growth, maturity and, finally, renewal and/or decline stages. To succeed in a competitive market, it is always wise to have a realistic long-term growth plan for any size business. The six business growth strategies advocated, particularly for start-ups, are:
- Market penetration
- Market development
- Alternative channels
- Product expansion
- Market segmentation (which includes geographic, demographic, firmographic, behavioural and psychographic)