What is business growth and why is it important?
Growth is often good for a business. An expanding company will usually be increasing sales and strengthening its position in the market. However, growth isn’t a strictly defined concept. In this article, we’ll explore what business growth is as well as why it is important for small businesses.
What is business growth?
A growing business is one that is expanding in one or more ways. There is no single metric used to measure growth. Instead, several data points can be highlighted to show a company is growing. These include:
- Company value
- Number of employees
- Number of customers
Companies can grow in some of these metrics but not in others. For example, revenue can grow without an increase in customers if the gains are caused by existing clients buying more. It’s even possible for one metric to increase while another decreases; if sales growth is brought about by a reduction in product price, a business’s overall revenue could still go down.
This means defining growth can be difficult. Those looking to grow their business should look at their business goals to establish the growth metrics they find important.
For some ambitious start-ups, this could mean doing everything they can to increase the total number of customers, even if they make a huge loss in early phases of growth. However, other businesses will benefit from slowly increasing revenue and sales to ensure money is coming in to help cover costs.
Why is business growth important for a small business?
It’s important that all companies experience growth. However, the type of growth required will depend on the stage of growth the business is in.
Start-ups usually need to grow in order to cement their position in the market and quickly get to a size that is large enough to bring in enough revenue to cover costs and begin to make a profit.
Mature companies don’t need to grow quite as fast. However, they may still want to ensure their metrics are going in the correct direction. An increase in profitability, brought about by sales process efficiencies, could help a stable business build liquidity to protect against future risk; even if revenue and sales stays the same.
What are the main business growth drivers?
Businesses don’t grow by themselves. If a company is looking to achieve organic growth, it will need to put in place systems to drive the growth. Here are the factors that can help a business grow.
1. People with the motivation and ability to drive growth
The most important factor is having people intent on growing at the head of the business. A growth focused owner can be the driving force behind the company’s expansion. Additionally, other managers and employees need both the motivation and the expertise to push a company to expand.
2. A strategy that prioritises growth
While people are the driving force behind growth, there needs to be a strategy in place that can push the business forward. This could revolve around bringing in new customers, releasing more products, or entering new markets.
3. Processes and infrastructure required to facilitate growth
Once the company has people who want to grow and a strategy that prioritises growth, processes need to be put in place to facilitate the expansion. This can include implementing automation software that makes processes more efficient or ensuring warehouses are large enough to store the stock that will be required as a company expands.
4. Enough funding to make the above possible
The above factors all have one thing in common, they require funding to implement. If an owner doesn’t have the money required to make the right hires, invest in the product, or implement processes, they’ll struggle to achieve growth.
Interested in Business Growth for your Business?