What Does Business Growth' Really Mean?
What is Business Growth?
In general, business growth is a company's expansion in various aspects, such as in profits, locations, or investments. All organizations have different ideas of what constitutes growth. For one company, business growth can be how satisfied employees are with their job, while another franchise may indicate growth as how stable and profitable their bottom line is. Various key metrics that organization leaders often use to measure their growth include revenue, number of clients, and company value.
Business Growth Vs. Growth-Driven Business
Companies will frequently describe themselves as a growing business or a growth-driven business. Although they may appear similar, these two characteristics are two different concepts. The following are key differentiating factors between growth and being growth-driven.
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A Growing Business
A growing business can often be indicated by increases in annual revenue. Some organization leaders will look to gross profit, which is revenue subtracted by the cost of goods sold. They may also evaluate their earnings before interest, taxes, appreciation, and depreciation to identify their business as growing.
Another indicator of a growing business is when new employees are hired each year. These incoming teams generally help a company manage its expanding consumer base and needs. Adjustments in a company's market share, business valuation, and market capitalization can also demonstrate a firm's development.
A Growth-Driven Business
On the other hand, a growth-driven business focuses on and responds to market fluctuations. These organizations have strategies that outline ways in which executives should evaluate and understand potential and existing customers and their shifts in demand. Growth-driven companies also align their sales and marketing efforts to boost revenue generation and customer retention.
Instead of prioritizing the analysis of data to determine growth, growth-driven companies create and adopt systems and processes to proactively plan their development. These tools include customer relationship management platforms, digital marketing, and automation. Additionally, businesses in this category are committed to delivering expectations and promoting their brand to ensure customer satisfaction.
The Importance of Business Growth
Business growth is necessary for a company's longevity and success. With an effective expansion, company owners and operators can acquire more assets, develop innovative products and services, and maximize profit margins. As a result, the business will attract more consumers from different demographics and have the opportunity to employ more workers. Growth also helps give brands a competitive advantage, as it demonstrates the company's credibility and ability to effectively serve customers what they want. Other benefits of a growing business include the following-
- Better resilience in the market - Business growth allows companies to survive and be agile to shifts in the market.
- Dominance over competitors in the industry - Growth helps brands build a positive and dependable reputation. This gives them an edge over new and existing businesses.
- Attract a talented workforce - People want to work with a company that has longevity and the ability to grow in the long run.
- More buying power - Suppliers and third-party contractors prefer working with companies that know how to operate effectively and profitably.
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4 Types of Business Growth
There are 4 types of ways businesses across all sectors can grow.
Organic business growth is the most common and effective way a business can grow. New brands and small businesses, especially, often pivot towards organic growth as their strategy. Companies can expand organically by creating and offering products and services to consumers. This form of business growth also focuses on physical development, in which business owners acquire more space, warehouses, or storefront locations. They may also add more working shifts so that new hires and more staff members can service customers or manufacture goods.
Strategic business growth emphasizes long-term success. Generally, organizations begin their strategic growth to expand their markets, after they have completed their organic growth. Business owners will often strategize marketing campaigns and new product development to reach strategic growth. Brands at this stage of growth will have usually plateaued in sales and will, therefore, need to use funds to supplement their long-term advancement.
3. Partnership, Merging, or Acquisition
Brands can also grow by developing a partnership or by acquiring or merging with another business. This practice allows a business to gain the consumer base from another brand and tap into a new market. They can also expand their inventory line and services, as well as physical locations. Growing a business in this way provides a lot of potential success, however, it can be risky. Organization leaders should assess customer demographics and markets, and ensure that the other brand's value aligns with the company.
4. Internal Growth
Internal growth refers to the adoption of technology, employee recruitment, and improved resource allocation. Companies that implement lean systems, workforce management software, and cost-cutting practices are enhancing their internal growth. While these new processes can help boost productivity and profits, they can cause minor disruptions since management must adjust operations.
4 Main Strategies for Business Growth
Companies that are interested in growing their operations in one of the four aforementioned ways can utilize these key strategies.
1. Increase the Consumer Base
Brands can effectively expand their market by targeting their advertising efforts on new consumer bases. Marketing campaigns should attract new customers and even entice ones from competitors. Companies can also lower the price of their existing products and services to appear as the affordable choice. Also known as market penetration, this strategy does not involve the creation of new products. This is because it can pose a challenge for owners, in which they must find a balance to remain profitable and expand their market at the same time.
2. Develop Innovative Products
Business growth can come from product development, which is the practice of making new goods for the existing market. For example, a shoe store, known for selling athletic sneakers, may expand its line to active-wear sandals. In this way, the brand is selling new products that are related to what their existing customers already love.
3. Introduce the Brand to New Markets
Also known as market development, this strategy entails bringing existing products and services to new markets. This is common for companies that have locations in new cities, states, or countries. Brands will also use this strategy to enter new consumer markets. For example, a coffee shop that has served local customers for years may tap into the commercial market to sell coffee beans to hotels.
4. Diversify Products and Markets
Diversification is when businesses produce an entirely new product for a new consumer market. For instance, the athletic shoe retailer creates a line house slippers for lounge-wear customers. This is considered the riskiest business growth strategy because of its unpredictability. To be successful, business owners need to conduct comprehensive market research and curate effective marketing strategies.
How to Write a Business Growth Plan
A business growth plan will differ from company to company, depending on their long-term goals, mission, and market. However, there are 8 key steps that almost all types of organizations can use to make a successful outline.
1. Plan, Plan, and Plan
Before writing a business growth plan, company leaders need to plan and identify their target consumers, competitors, and overall market position. If the business has been operating for some time, executives will need to assess historical growth as well. These insights will help streamline strategies for future expansion.
2. Look at Growth Plans From Other Companies
Successful companies may have their growth plans for public viewing. Executives should review these outlines and take note of steps or goals they can utilize for their company.
3. Identify Growth Opportunities
Each brand has its own growth opportunities that align with its resources and goals. This can be the creation of new products, global expansion, or accessing new markets. Identifying which opportunities are available for a brand will help company leaders set goals for their growth plan.
4. Assess Existing Employees
Business teams can help a brand grow significantly if they are made up of reliable and skilled employees. Management should evaluate their existing employees to ensure they meet the requirements of their positions. This will also help highlight how the team can accomplish growth and whether or not they need more resources.
5. Get Funding
Whether a business plans to develop new products or set up new locations, it needs funding. Executives should delineate where and how they plan to acquire more capital. This can be through loans, investments, or historical profit.
6. Map Out Marketing Efforts
Business growth depends on effective marketing campaigns. The plan should touch on how the company plans to advertise its goods and services to new and existing customers. It should also mention how marketing strategies will progress as a business grows. For instance, the marketing team may consist of three employees, but by the second year, the brand can aim for a six-person team.
7. Get Advice
Successful business owners have valuable insights that can help a brand and its growth plan. Entrepreneurs should network and connect with business leaders and ask for advice.
8. Begin the Writing Process
At this stage, company executives can finally sit down and create a business growth strategy for their brand. It is also important that they reassess the growth outline quarterly to ensure they are on track to their goals. It may also be necessary to make adjustments to the plan to reflect market fluctuations and current events.
Conclusion to Business Growth
- Business growth is often referred to as a company's development and success in profit.
- Companies will have different meanings and indications of growth.
- Business teams that focus on growth will be able to boost their market resilience, have more buying power, and gain a competitive advantage.
- The key ways to enhance business growth are to plan ahead and conduct thorough market research.
- What is Organic Growth in Business? Definition & 5 Primary Strategies
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- Demand Generation Strategy- 7 Top Strategies to Look Out For
- What to Know About Demand Generation Marketing
- 7 Ultimate Business Growth Strategies
- An 8 Step Guide to Developing a Business Growth Plan
- What Does Business Growth' Really Mean?