Two types of growth every business owner should have in play.
Growth carries great weight! The weight of winning it, the weight of servicing it and the weight…of understanding and leading it! Without it your business is on a death curve. It will harm your income growth, customer acquisition and retention, team and supplier relationships and your opportunity to one day exit your business. Think of it like a President who has lost favour with the party and population – nobody wants to stick around a lost cause!
Listen to the Money Show podcast of the discussion Pavlo Phitidis had about the 2 types of business growth:
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Growth is a System.
Business growth is a system of activities, integrated to create an outcome. It doesn’t come from the product or service your business offers. It comes from the organizing the functional, commercial activities of your business into a single system. Marketing generates new leads, sales convert them, operations fulfil and service them and administration coordinates them – all work as a single system to create a great experience that customers than promote. The product or service you offer is what solves the customers problem; the growth system is what creates a good experience in having that problem solved for the customer.
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Growth is designed.
You can build a ship to sail fast or slow. You can build a building to be small or tall. It all comes down to design. Being clear on what you want to achieve in your business lets you design the right system to achieve it. When building an Asset of Value™, design is premised on your companies positioning in the market. Once clear, a System of Delivery (the commercial functions optimized and integrated into a single system of coordinated activities) enables your positioning. With these two layers in play, you can then direct and organize your team to power and lead the system implementation. This generates two outcomes. Organic growth and time; time to lead next level growth.
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Organic Growth
This is growth that sees your business grow revenues on a consistent, reliable basis, largely without you. The rate of growth depends on several elements including country GDP growth, sector and industry growth, life stage of your business amongst others. For example, if your country growth rate is 3%, your sector and industry is forecast at 5% and you are a 7-year-old business, you should look to secure an organic growth rate around 15-18%. If you are a 30-year-old business, you might adjust it to around 12-15%. Remember, this is growth that occurs largely with out you. It is driven by the System of Delivery and your team and is premised on your positioning.
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Next Level Growth
With organic growth in play, and most valuably, your time released from daily operational activities, you need to turn to next-level growth. As the term suggests, next level growth sees a significant increase in revenue coupled by a moderate increase in costs. The level up is felt in profit as the “yawn” between revenues and costs widen.
The “yawn” is an essential indicator of next level growth. Ramped up revenues that are tracked by ramped up costs grows your business. It also grows complexity, points to a failure to scale effectively and increases your risk.
In an Asset of Value, next level growth that yields the “yawn” is gotten by finding opportunities that maintain the positioning of the business, require little adjustment to the System of Delivery and don’t stretch your team way beyond current levels of comfort and capability. These opportunities can be in new product development, new market entry or acquisition, new investment in plant, equipment, space, digitization, marketing, and talent.
Essential, vital, critical to the choice we make as business owners (and the single biggest investors in our business) is not to stall or disrupt organic growth. Landing a next level growth opportunity that stalls organics growth simply pulls you back into daily operations and takes your eye off the opportunity, further exposing and risking your business to harm.
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Valuation
Growth, the history of growth and the future promise of growth are one of the biggest factors impacting your business valuation. A buyer or investor into your business does so either because they see growth potential unrealized in your business and will offer you a few dollars, or because the growth in the business makes it worth man, many more dollars. My first few business I bought were priced at a dollar each. They had served their founders well over the years and time had made them complacent. The complacency was fatigue which came about because of 30-40 years of running a business that centered around their everyday involvement in daily/weekly operations. Without them there, there was no growth. That was obvious to me and the bargain price of dollar had liabilities attached to it plus no growth. A fair price…. right?
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Virtuous Cycle
Business growth suggests opportunity to talent. Everybody wants to attach to a winner. Is also suggests value to customers, growth to suppliers. It holds the promise of growth in turn to funders. All are roll players in further driving your growth.
Your business growth is never yours alone! It also attracts unwanted attention from competitors if you become complacent because of it. Complacency, a sense of “having arrived” reduces vigilance and the relentless attention to growth that sustaining it requires. Competitors entering your domain, when vigilant, provide opportunities to invest in sustaining innovations and further can educate and grow a market of customers that your incumbent leadership can access too.
If you are not growing, you are dying. Pursuing growth without having built or designed your business to sustain itself risks everything. The goose that lays the golden egg (organic growth) needs to be solid and secure before you charge ahead into the market looking to become bigger for the sake of it.
