What is Organic Growth in Business? Definition & 5 Primary Strategies

What is Organic Growth in Business?

Organic growth in the business industry refers to the process that a company undertakes as it develops and expands. Organization leaders will generally create an organic growth strategy that outlines how they will scale their operations using existing resources. The indication of growth will vary for businesses, as it is dependent on their products, services, goals, and values. The most common ways entrepreneurs will measure their organic growth include the following.

• Output - High productivity and output levels ensure more products and services are in the market.

• Efficiency - Employees are working quickly and efficiently to provide customers with the goods they want and need.

• Revenue - More revenue means that the company is generating a profit and enhancing its financial stability.

• Cash Flow - A healthy cash flow ensures a brand is able to cover short-term liabilities, such as wages and leases, while still have some earnings left over.

Monitoring and making sure a company is growing organically is important for owners, as well as employees and stakeholders. It guarantees that a business has enough profit to compensate staff members and fulfill promises of bonuses and raises. High-growth companies will also have ample savings to invest in their operations' expansion for future years. This can entail hiring more talented employees, adopting advanced technology, and improving sustainability.

Important -: Organic growth is a company's natural expansion during normal business operations. The growth occurs as a brand utilizes its existing resources, labor, and capital.

Organic vs. Inorganic Growth

In contrast to organic growth, inorganic growth is when businesses expand from acquisitions, mergers, or opening new locations. While organic growth is the development of normal business operations and marketing, inorganic growth occurs externally. Organization leaders will turn to inorganic growth strategies to try to overcome evolving market conditions.

For example, an ice cream shop owner may notice that their customer base is declining because many are veering towards a new frozen yogurt store. Instead of developing their own line of non-dairy desserts, the owner acquires the frozen yogurt shop for $500,000. This tactic helps the ice cream shop owner effectively restore their consumer base. This type of inorganic growth allows business owners to quickly expand and protect their operations.

However, various methods of inorganic growth can be risky for businesses. Acquisitions, like the one with the ice cream shop, require a lot of effort and capital. Additionally, some businesses may not be a great fit for another, resulting in an unsmooth integration. Unsuccessful acquisitions can lead to decreased sales and the closure of a business. And with the market consistently shifting, businesses may have a hard time keeping up with demands.

Therefore, organic growth is oftentimes considered more necessary for long-term success. Although it can take longer for businesses to address market changes and maintain a competitive advantage, it is much safer and more strategic. Organic growth comes from within a company's current operations via robust business plans. Following the previous example, the ice cream shop owner would either develop a new product line or flavor to entice customers back into their store.

5 Critical Organic Growth Strategies

Businesses can grow organically using the resources, skills, capital, labor, and relationships that they already have. This allows for a healthier and more stable approach to expansion. Some best practices company leaders can use for their organic growth include the following.

1. Identify Target Consumers

Business owners need a thorough understanding of who their ideal target consumer base is. This will open the door to effective marketing campaigns and advertisements. Executives will also be able to curate their business accordingly and produce products and services that their customers want. Research is key for this strategy, in which company leaders should conduct focus groups and surveys to learn about their market.

2. Define a Niche

Narrowing the consumer base into a niche will improve marketing efforts and highlight competitors in the market. For example, an oat milk company may emphasize its advertising and social media campaigns to its vegan consumers. Not only does this personalize marketing communication, but it can maximize profit margins.

3. Stand Out from the Crowd

With a niche consumer base identified, business owners need to highlight factors that differentiate them from competitors. Brands can showcase their unique features, practices, services, and benefits. The oat milk company, for instance, can advertise its sustainability and green manufacturing. Having a differentiator will demonstrate why a company is more valuable than others.

4. Use Traditional and Digital Marketing

Organization owners should research their target consumers and find out which channels they like receiving information. This could be through social media, Google, billboards, or television commercials. Ensuring a balance between different traditional and digital methods of marketing will enable high growth.

5. Promote Brand Awareness

Customers cannot buy a product or service if they do not know it exists in the first place. Companies need to make sure their brand and expertise are visible to potential customers. Modern businesses will utilize demand generation-driven efforts to promote their image. This includes blogging, social media engagement, and SEO.

Important -: According to studies, fast-growing businesses adopt balanced marketing approaches that incorporate traditional and digital methods.

Key Takeaways to What is Organic Growth in Business

• Business organic growth is when a company develops and expands using its existing resources.
  
• Companies can measure their organic growth via revenue, cash flow, efficiency, and output.
  
• Unlike organic growth, inorganic growth occurs externally, through acquisition, mergers, and new locations.
  
• Common organic growth strategies include identifying target consumers and determining key differentiators.