Growth is one of the critical factors that your business must experience. If you can’t define what growth means, you will have fewer chances of succeeding or even surviving in the business realm.
In a world where you experience immense pressure to expand and keep up with your competitors, you’ll tend to associate growth with more revenue, higher profits, and even more significant business value.
An expanding company will usually increase sales and also strengthen its position in the market. But, how do you define growth? What does business growth mean?
WHAT IS BUSINESS GROWTH?
Defining what is business growth is challenging since many professionals disagree on its official description. One of the standard definitions is when a business reaches a point for expansion and seeks additional options to gain more profit.
It simply means an increase in size or scale in operations usually accompanied by an increase in resource and output.
A growing company continues to expand in more ways, and any metric can’t measure growth. People used several data points which highlight the development of a company. These data points include:
- Company value
- Number of employees
- Number of customers
Some companies can grow in these metrics, but it is not suitable in others. Revenue can succeed without increasing customers only if existing clients continue to buy more of their existing or new products.
It is also possible for a company’s performance to increase in one metric while the other one decreases. Thus, defining growth can be difficult, and it all depends on your business goals.
IMPORTANCE OF GROWTH TO SMALL BUSINESS:
Experiencing growth is essential. However, the required type of growth will depend on the stage of development your business is in. Start-up companies usually need to grow to cement their position in the market. By doing so, they’ll grow into a large size to bring in enough revenue to cover the costs and start profit-making.
On the other hand, Mature companies don’t need to grow quite as fast, but they may still need to ensure that their metrics are rising in the correct direction. Businesses will significantly benefit from the increase in profitability. This could help build liquidity to protect against future risk, even if the revenue and sales of a company stay the same.
THE MAIN GROWTH FACTORS
Businesses don’t grow by themselves, especially if a company is looking for ways to achieve organic growth. They will need to put in place some systems that will help with the development of their business. Some of the business growth factors are:
- Survival: No single enterprise can monopolize a competitive market. The competition can be direct or indirect. Any business that fails to grow will not survive in the market.
- Motivation and ability to drive growth: Companies will need people who intend to grow at the head of the business. A company or business owner focused on cementing their company in the market can be the driving force behind their company’s expansion. Managers and employees need motivation and expertise to push a company to increase.
- A strategy that prioritizes growth: When there are people behind the driving force of development, there must also be a strategy that prioritizes growth. Companies or businesses that plan to push the industry forward can bring in new customers, release more products, or enter new markets.
- Process and infrastructure: If a company already has the first two growth drivers, they will need strategies to be put in place to facilitate the expansion. This can include implementing software that will make processes more efficient or building additional large enough warehouses to store stocks required when a company or a business expands.
- Funding: The factors mentioned above will only be possible if the company has funds to implement to put these factors into action. If a company or a business owner doesn’t have any money to hire the right people, invest in products, or implement processes, they’ll struggle to achieve growth.
ADVANTAGES AND LIMITATIONS
Companies or businesses may try to achieve growth to obtain the following advantages:
- To get the economies of scale
- For business exploitations and opportunities
- For facing competition in the market through diversifying their product line
- For protecting diverse business conditions
- To gain economic and market power
- To raise profits and create resources for further reinvestment into the business
- For optimum utilization of their resources
- To secure subsidiaries, tax concessions, and other incentives which the government offers
Despite the advantages, growth also has its limitations, such as:
- Finance: External growth requires additional capital investment, which can be challenging for a small firm to arrange.
- Market: Growth can only be achieved to the extent that the size of a market permits. If a company grows faster rather than increases in the size of the market, it is most likely to face failure.
- Loss of motivation: Losing personal touch with your employees is unavoidable, especially if the motivation and morale tend to be low, which results in inefficiency.
- Management: As growth increases, the number of functions also increases. This makes coordination and controls very challenging. If an organization is not capable of accommodating them, growth may be harmful.
- Lack of knowledge: A lack of expertise in handling a new company or in new markets will result in loss and failure, especially when it comes to taking new units and improving their earning potential.
Business growth is a critical stage that companies and small business owners must look up to. Choosing the right thing means your company or business will eventually grow and increase in the market. Choosing the right growth capital for your firm means you will need all the knowledge and expertise to help you in expanding your business in the market.
An unwise choice will only lead to disaster. If you’ve got plans to expand your business in the market, you will need serious consideration on the steps you will take to avoid any loss or failure in the future. If you need more successful tips and techniques for business growth, listen to podcasts that could help you reach the top.