Do You Understand What It Takes To Grow Your Business?

When business leaders turn their minds to business growth they should only be considering what I term real sustainable growth. What is real sustainable business growth? Well, that is business growth that continues year after year, that builds upon what has gone before, and which takes a business to a greater level of competitive strength and profitability. It represents business growth that compounds year after year and thereby builds a growing momentum as each year passes.

Often a business’s  efforts to grow are wasted as they:

1. are not directed at building competitiveness
   

2. are short-term in their perspective, and
   

3. fail to capture the benefits of compounding by building on what has gone before.
   

Business leaders must also have a clear view of what business growth means to their individual business. Now that may seem a strange thing to say, because surely business growth is always good and simply means getting bigger and bigger and bigger. Well, that’s what many leaders assume before they pause and begin to reflect.

What is Business Growth?

Business growth is often assumed simply to be increasing annual sales and enterprise size.

But, what about if an increase in sales volume would lead to a decrease in net profit for several reporting periods due to a jump in fixed overhead costs? Most business leaders would pause before pursuing this course and say that growth should be focused on growing profit not just sales.

But, what about if a business decides to invest in building short-term capability which resulted in a short-term drop in net profit but a longer term growth in sustainable profits? Most business leaders would say that this is an acceptable course of business growth.

But what about a closely-held family business which presently, say, earn 10% net profit on sustainable annual sales of $50m and believe that is adequate for the family; and think they should focus on quality of life? Many of us would understand such a decision.

So, what we now have is that business growth may mean:

1. A growth in sales
   

2. A decline in profit
   

3. An investment in capability
   

4. An investment in quality of life
   

Of course when you explore the question, then growth could also mean many other things.

The important message is that when your mind turns to business growth, resist the natural urge to think in terms of business growth meaning ‘simply getting bigger’.

The answer to what growth means to your business lies in two questions:

1. Why you want to grow?
   

2. What goal you are seeking to achieve?
   

As a business leader, do you clearly understand the answer to these fundamental questions? If not, then maybe your business is not growing in the direction it should!

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