Managing your business growth organically

Growth should be a goal of any business. That said, not all growth is created equal. If not done correctly, it can be downright dangerous. One study really puts it in perspective. California State University finance professor Cyrus Ramezani looked at more than 2,000 public companies to observe the link between shareholder value and business growth. The report showed that companies with the fastest revenue growth (which equated to an average annual sales growth of 167 percent over a decade) performed worse in share price than their slower-growing counterparts, whose growth averaged about 26 percent.

Surprising, right? That’s why it’s so important to manage your growth and create realistic goals for your business. We’re starting this series to show you how to manage your growth effectively, so that you can make sure your business is set up for long-term success. This week, we'll look at a few things you can organically do to manage growth for your business. 

Establish a goal for healthy growth

First, we need to establish what healthy growth actually looks like. We see it around 10% growth annually, but that number can change on a case-by-case basis. The most important thing to realize is that as your revenue grows, your expenses may also grow. You need to create a meaningful growth forecast so that you can identify and plan for healthy, sustainable growth. 

Say, instead of 10% growth, you want to grow 30% in a year. Well, that plan is going to look a lot different. This is why we talk so much about understanding your financial statements. You need to make sure you have good, rock-solid financial statements because, without them, it’s impossible to do this sort of forecasting and planning. You need good data. 

So what are some other key indicators that you’re ready to grow organically? Let’s look at the factors that you’ll want to control on your side. With this, you’ll be able to control your growth, from how much you spend on marketing to how many people you’re going to contact for referrals. You’ll be able to dial it in based on what you and your team can handle.

Do You have the time to grow?

This is a big deal and one that shouldn’t be taken lightly. The planning and execution aspect of healthy growth requires a ton of hands-on work to get it right. If you haven’t yet, book time with a CPA. They can help you twofold. First, they can get you further away from the day-to-day reporting aspects of your business so you can focus on growth. Second, they can help you come up with a plan to make sure that your ROI is what you need it to be. More on that in a second.

Will you have the money to grow?

Your CPA can help you with this one. Basically, what we’re looking for is controlled costs for goods or services. When you have your plan in place, you’ll be able to see if it’ll make sense for you to expand because you’ll have the money available to pay for that growth. We’re also looking to check if your labor cost will rise with your revenue at a similar proportion as it is right now – or go the other way. Sometimes those costs become more efficient so that you get economies of scale. 

It really boils down to if I sell more, will I make more? Not just more profit, but a better margin.

Will the ROI make sense?

This is related to the last topic, but it’s worth repeating. A business is all about the return on investment – and just because you’re spending more doesn’t mean that you’ll automatically make more. Talk with your financial advisor and look through your entire PNL to make sure that this number is moving in the right direction as you scale up. If not, you might have to come up with a new plan.

Will you have enough staff?

Staffing issues are a big deal, especially these days. Just because you have the money, the supplies, and even the business, doesn’t mean that you’ll have the staff to keep up. Plan for expanding your staff and the accompanying costs. Can you expand with the staff you have? Will they have to work overtime? What about new hires? Are there enough people in the area to find someone or will you have to advertise? These are all questions that need answering.

Do you have the supplies in place?

Your supplier might be used to supplying you with a certain number of supplies at a price point you’re used to. It’s worth exploring with that company whether they can provide you with more at a cheaper price. Sometimes, those supplies just won’t be available. In that case, you may have to shop around or consider alternative items.

Do you have a realistic forecast?

You may have been super excited when you first drafted up your business forecast, but has it been reviewed by someone else? Schedule a time to meet up with a professional so that they can take a deep dive into your numbers and written documentation to make sure that your plan to scale is realistic. They can help you budget, come up with better processes, and understand how leadership and management positions may need to change as you grow. 

There you have it, six questions you should ask yourself before you start growing your business organically. Don’t let this discourage you. If anything, we hope you’re empowered to talk to your CPA and come up with a plan that will keep your business safe and healthy. Growth is important (and can even be fun) for literally any business. Don’t be afraid of it. Let’s come up with a plan together.

Contact us for a free consultation!