Most people in business know that you need to be constantly growing to see continued success. There’s never any rest for business owners — once you pass the struggle of seeing your company survive through the startup phase and become a small business, you need to continue working hard to keep growing. But why exactly is business growth so important?
What Is Business Growth?
First of all, what do we mean by business growth? There’s no simple answer to this question, as every business owner defines growth as something different. In fact, growth often means choosing the objective that matters most to you and just striving to see an increase in this area. At the same time, a growth metric you chose to ignore could decrease — at least for a while.
Bearing this in mind, business growth could be:
- Market share
- The range of products or services you offer
- Company value
- Number of customers
- Number of employees
- Just about anything else that shows your business is expanding
The Problem with Stagnated Growth
To understand why growth matters, you need to consider what will happen if you stop growing.
The risk that likely comes to mind is losing customers to competitors. Whatever your industry — even if you currently dominate your niche — competition is a constant threat. Customers may choose a different company over you if one of your competitors is better able to meet their needs, such as with more up-to-date products and services. In fact, just the inability to stay relevant is another risk.
Competitors may take more than your customers: they could also attract your employees. If competitors are able to offer more opportunities for career advancement or higher wages (or both), they become more appealing to top talent. This becomes a greater risk as your competitors grow — which is exactly what will happen if your business stagnates. Therefore, failing to grow now will actually cost you money, as you’ll need to go through the lengthy and expensive process of hiring new workers. Furthermore, innovation may suffer as a result of lost talent, making it more difficult for you to grow at a later date.
Innovation suffers in other ways if you fail to grow. If you keep using the same processes you’ve always used, you’ll miss the chance to find ways to reduce costs and improve efficiency. Other innovative ideas you’re ignoring could have enabled you to improve the customer experience.
There is also the risk of missed opportunities to enter new markets and diversify. Let your guard down and your competitors will be ready to enter these markets, taking your potential share for themselves. Even if you have no direct competitors at the moment, there’s no reason to believe it will stay that way. All it takes is for an entrepreneur to see an opportunity — and your business could even be finished.
Put another way, you may feel hesitant to try new methods and strategies due to the upfront costs and the investment of your team’s time and other resources. However, you need to take actions like this to ensure the long-term survival of your business. The key is to carry out an appropriate risk assessment to determine which opportunities are worth exploring.
Benefits of Growing
Avoiding problems that you’ll incur if your growth comes to a standstill is just one reason to have a growth strategy. Another is that you’ll reap the benefits of growing. Some of these advantages include:
- Increased revenue to fund projects
- Make your business more appealing to investors
- Attract top talent
- Enter new markets with your current products and services
- Maintain customer loyalty
How Difficult Is Sustained Growth?
Unfortunately, sustained growth is a challenge — it’s one of the main reasons why companies fail. One study that looked at the survival rates of non-financial companies in the S&P 500 between 1983 and 2013 found that only 36 out of a sample of 458 were able to manage strong growth after three decades.
The same study found that sustained growth is often more dependent on markets and acquisitions than outperforming competitors. This means you need to be looking for opportunities outside the most obvious choices.
It’s equally important to monitor the growth of your company to determine exactly what is driving current growth. You may have a number of strategies running simultaneously and a few distinct factors could be responsible for the majority of your growth. Search for patterns that allow you to pursue relevant opportunities in the future and avoid the riskier ventures.
Growth vs Profitability
Profitability is also critical — it’s what allows you to continue to exist. Most people agree that there is a distinction between profitability and growth, but does one matter more than the other?
First, let’s take a step back and define profitability. By profitability, we mean net profit: the amount that remains after you subtract the costs relating to manufacturing, production, and selling products. If you have no investors or other types of financing, profit is your only source of capital. In these cases, profits that are too low mean you have insufficient funds to run your business.
With this in mind, becoming profitable is clearly essential for many businesses. However, the best way to gain a profit is often through growth — particularly right after you establish your company. In fact, even if growth initially costs your business money, its ultimate purpose is to increase profits. Therefore, the question about profitability or growth as the priority is irrelevant: the two are intertwined.
Making a Loss While Growing
There is a caveat to the above: some companies that are thriving today made losses early on (often considerable losses), but were able to grow considerably. In fact, this has been the case for several startups that brought major disruption to their industries — Uber being a top example. The key for this strategy to work is for your company to grow in terms of awareness and customers. Rapid expansion means revenue is negative at first, but investor interest in the startup means this has little importance.
Outsourcing for Growth
There is no doubt that growth is essential, and there are many ways businesses can grow. Whatever you decide to do to grow, it’s helpful to outsource some of your business functions to take the pressure off our internal team and reduce the need to hire employees. In fact, outsourcing is even useful if your goal is to grow your team, as it allows you to gain a wider range of skills at a lower cost than hiring all full-time employees.
You can find all the skills you need to outsource with the virtual assistants at MYVA360. Receive a 10-percent discount on all our services by scheduling a consultation.