What is business growth?

In the world of business, Growth refers to the process through which a company expands or increases its capabilities and resources.

Growth may include a rise in revenue (sales), market share, customer base, or even the expansion of product lines and services.

FasterCapital has the following definition of business growth:

“Business growth can be defined as an increase in the size of a business over time. This can be measured in terms of revenues, profits, assets, or market share. There are many different factors that can contribute to business growth, and it can be a gradual process or sudden event.”

Business growth – two types

There are two main types of growth: organic and inorganic.

This is achieved through internal efforts, such as improving operational efficiency, boosting sales, or developing new products.

It reflects the business’s ability to expand using its own resources.

  • Inorganic growth

This term refers to growth through external strategies like partnerships, mergers, and acquisitions.
Inorganic growth allows businesses to quickly scale, enter new markets, or acquire new technologies.

Image depicting concept of business growth and explaining how to achieve it.
Image created by Market Business News.

Features of business growth

  • Revenue growth

When a company’s revenue rises, we know it is growing. Revenue is the most visible indicator of a business’s success.

When revenue rises it means that your sales are increasing, that is, you are attracting more customers, your existing customers are spending more on your products or services, you have raised prices without a decrease in sales volume, or a combination.

  • Customer base and new markets

Expanding your customer base and entering new markets are also effective ways of achieving business growth.

If all of your sales occur in the domestic market, and you feel that you have reached as far as you can, perhaps it is time to consider exporting. The global market is much bigger than the home market.

By selling in various countries, you can sustain your company’s long-term success by diversifying income sources. If your primary market faces a recession, your total sales need not drop if other markets are not experiencing a downturn.

  • Market share growth

If you can gain a larger share of the market, it means that your business is outperforming your competitors. For businesses that have just entered a market, gaining market share can be challenging.

Business growth challenges

  • Your reputation or brand image

Beware of some of the problems a growing company can face. If your orders increase faster than your production or delivery capacity, you could end up letting many customers down.

This could negatively affect your brand name, that is, your reputation in the marketplace could suffer.

  • Cash flow

Cash flow problems are common, especially among small businesses when they expand. If you get a big order, but won’t get paid for sixty days, and then two more large orders come in, you could find yourself with a serious liquidity problem.

In this context, liquidity refers to the availability of cash or assets that can quickly be turned into cash to meet short-term obligations. Liquidity measures a company’s capacity to settle debts and cover immediate costs like supplier and employee payments, crucial during expansion or large order fulfillment. Lack of it can strain even profitable businesses.

Conclusion

There is more to business growth than simply making money. It is about strategic expansion, enhancing the company’s footprint, and building a sustainable model that can withstand market changes and challenges.

Video – What is Organic Growth

This educational video, from our sister channel on YouTube – Marketing Business Network, explains what ‘Organic Growth’ is using simple and easy-to-understand language and examples.