The one common factor all our clients have is the desire for sustainable business growth. The range of business growth definitions is almost endless, anybody with an opinion will have their definition of business growth. The reason for this, is business growth is very subjective and relates to each enterprise differently.
However, when you look at various definitions, they all have a common ground. A process towards achieving a goal or series of goals that improve the sustainability of that enterprise. Goals that involve increasing the top line, additional market share, increased sales are often quoted. However, what about the expenditure? If the net profit increases without increased sales is that growth?
I have worked with several business who have had income related goals which have had a negative impact on the net profit of the company for years.
It is a common misnomer that business growth is simply defined by successful sales and a company’s bottom line. There is so much more to it than that. Indeed, the beauty of growth can often be in the eye of the beholder, hence all the definitions.
When looking at business growth goals, have you drilled down and considered customer and employee retention and even staff happiness to achieving business success.
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.
Ultimately, whatever the avenue, if you can’t measure it, you can’t improve it.
How to achieve business growth…
Business growth can only be attained through a communicated vision to inspire and drive all stakeholder to achieve.
A three to five-year plan is a must but it doesn’t need to be a 50 to 100-page document which remains locked away. It needs to scope out key milestones for the business which are barometers of growth. For example, the lead key performance indicators could be: number of inquiries, average quote value, time to close quote, percentage conversion rates and so on. Elements which may be considered are: a description of expansion opportunities, financial goals, staffing needs and responsibilities and a marketing plan.
There is no point in focusing specifically on sales growth if it cannot be delivered. At a time of political turmoil, it is more important than ever to focus on what you can control not what you can’t.
Indeed, those who play aggressively to their strengths while others are hiding away from the storm may well find themselves fulfilling ambitions while competitors stall.
Why is business growth important for a small business?
It’s important that all companies experience growth. The phrase “if you are standing still then you are going backwards” springs to mind. However, the type and speed of growth required will depend on several factors.
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.
Which of these four stages are you currently in?
- In the startup phase, the company begins to find its place in the market. It needs to discover if there is room for its product or service and, if there is, what it needs to do to be successful. In this stage, companies generally have only a few employees who take on multiple roles. Challenges faced by companies during this phase include keeping hold of employees and making the best use of the limited cash available.
- When a company enters the growth stage it should have a solid business model and be working towards strengthening its market position. As the company grows, people must be hired to run the expanding sections of the business. The main challenge during this stage is balancing the increase in expenses required for growth with the still limited funds available.
- During the maturity stage, the company should be relatively stable. It should have procedures and teams in place that allow the business to run without too much input from the owner. The business should have plenty of cash allowing it to invest in opportunities such as new products or acquisitions. The main challenge is ensuring there is no complacency while staying ahead of competitors looking to disrupt the market.
- The renewal/decline stage is when stable businesses begin to see a decline in revenue. While it may not spell big trouble at first, at this point business owners should reinvest in the business to recement its market position, or, if the owners don’t have the motivation to do so, attempt to cash out before the situation worsens.
What are the influencers to business growth?
Sadly 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 stakeholders such as employees and contractors 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
This one is often overlooked by small businesses when they consider business 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.
How to measure business growth.
It’s crucial that businesses know how fast they are growing. Having this knowledge will help managers plan for the future as well as show if their growth strategy is working.
If owners know they are likely to have 10 per cent more customers in six months’ time, they can begin to make structural changes to prepare such as hiring new employees or purchasing new equipment.
Define your business growth goals
The first step to measuring business growth is to decide on your goals. These will likely be related to the growth stage your company is at, as identified earlier in the article.
Here are some growth metrics businesses can focus on:
- Revenue – Revenue shows how much money a company is bringing in.
- Higher profits – Higher profits are generally a sign everything is going well. However, businesses will still have to look at factors like the number of customers being onboarded or leads coming in to ensure future success.
- Higher sales – Increases in sales usually suggest a company is growing. Business owners should be wary if a short-term sales increase has been brought about by factors such as heavy discounts or if the increase in sales causes the company to be in danger of overtrading.
- More customers – More customers are a sign of growth. However, it can be an issue if customer acquisition costs are high and customer retention is poor.
- More efficiency – Improve the processes involved in being in business.
Collect data based on these goals
Once a business has defined what it wants to achieve, it will need to collect data based on these goals. The more data companies have, the more accurately they can measure growth.
More data will also enable businesses to spot potential issues. Be aware of paralysis by analysis and set clearly defined research patterns.
Don’t forget outside factors
When measuring your company’s growth rate it is important to take outside factors into consideration. Consider undertaking a PESTLE analysis when reviewing performance.
Finally, be sure measure growth regularly
Measuring growth should be done on a continuous basis. Keeping monthly or quarterly records will give owners useful insight into how their business is expanding, allowing them to ensure they are growing at a rate that meets targets, without being at risk of overtrading.
As with all our shared knowledge if you need implementing a successful business strategy please reach out and connect.
April 27th, 2021