When it comes to owning a business, one of three things could happen:
- The business could grow extremely quickly, which sounds great until it presents the problem of how to suddenly both fund, and obtain the resources needed to support its growth.
- The business could grow, but grow at a rate which is too slow – eventually leading to stagnation.
- The business could fail to grow altogether, lose sales, and eventually go bankrupt.
With none of those above options sounding particularly desirable however, what growth level should businesses be aiming for? The answer: a sustainable one.
Sustainable business growth is attainable, but it does require a strategy in order to be implemented successfully. Thankfully there are tips and tricks business leaders can use to guide them in order to achieve sustainable growth levels with their businesses. Below are six of the best, put together by the industry experts here at Growth Idea.
What does sustainable growth mean in business?
The official definition of sustainable growth describes it as “the maximum growth rate that a company can sustain without needing to increase financial leverage”.
But what does that actually mean in practice?
Simply put, sustainable growth refers to the safe amount that a business can grow before it needs to borrow money in order to support its expansion, either by incurring debts or from undertaking equity financing.
So, in terms of balancing your customer base and your revenue, a sustainable growth level would be achieved by the business growing at a steady rate that is manageable with available income and expenditure resources.
How do you ensure sustainable business growth?
A business is never going to turn down additional sales or revenue. So how do you, as a business leader, handle more work whilst balancing larger demands from your clientele and additional pressures onto your team?
There are options. You can:
- Sell business equity in order to raise new money
- Attain an increase in the businesses debt financing
- Reduce any dividend payments to shareholders
- Increase the businesses overall profit margin
- Decrease the businesses total asset turnover
However, none of those options come without challenges:
- Selling business equity will dilute owner’s shares.
- Obtaining more debt severely increases the risk of the business entering bankruptcy
- Shareholders are likely to be unhappy and uncooperative with reduced dividends
- Increasing profit margins and decreasing total asset turnover are both long-term strategies which can take significant amounts of time to overcome.
Thankfully, there are things that you can put in place in the meantime (especially if your chosen option will need to be enacted over a longer period of time) to begin to strategise a sustainable business growth level. They include:
1. Promoting an authentic purpose
Every business needs to identify and promote its “why we do what we do.” This acts almost as a shining light that guides each aspect of a business: from recruitment, customer management, through to even product development and sales.
A strong purpose is capable of driving both steady growth and profitability. In fact, it’s capable of driving so much profitability that investing in one of the companies on the Stengel 50 (the list of the top 50 highest-performing companies) for the past decade would have resulted in a higher return on investment than if you’d invested in one of the companies on the S&P 500.
But to be able to achieve sustainable success, companies must thoroughly revisit and reevaluate their sense of purpose to ensure it is still relevant to the organisation and its employees. An authentic, genuine and motivating purpose will provide:
- Constant and consistent focus for the businesses day-to-day work
- Strong emotional engagement within the company and outward with its customers or partners
- An opportunity for continuous innovation
2. Build brand equity to achieve scalability
To achieve a level of steady business growth, your business must be scalable and in order to do that you need to build brand equity. Brand equity refers to the emotional connections you form with your customers that keeps customers returning to your business over competitors.
Building brand equity starts with good marketing, but it can become empowered by aligning your sales and marketing teams toward the same revenue goals.
It may surprise you but sales teams know the issues that customers have far better than marketing departments do. The hidden power here is of course to align your sales and marketing departments so that sales communicate the problems, and marketing builds campaigns around them.
This way, the marketing team’s campaigns have more success, are able to generate emotional connections with prospects, who can be processed as qualified leads that sales teams then convert to customers. More customers means more brand equity, which means much more sustainable revenue.
3. Network, partner, collaborate
When first starting out, business owners can be tempted to do everything themselves, powered by fewer resources and high ambitions.
Though there’s nothing wrong with this, overloading the plate before you learn to carry it can damage your business – especially if you take on too much in areas where you lack experience.
In the era of digital connectivity, and with the rise of Linkedin networking, it is much easier to build relationships with talented experts, partners and collaborators.
For example, projects could be achieved at a price which is reasonable for the level of resource currently available to the business at that time. Create relationships with an idea of knowing what that partnership will enable you to achieve, and allocate the specific amounts of resources to enable that end goal to be achieved in order to accomplish tangible – and sustainable – results.
4. Place customer retention over acquisition
The cost of acquiring new customers can be around five times more than retaining current ones. Furthermore, a 2% increase in customer retention has the same effect as decreasing costs by 10%. To put it another way, reducing defection rates by 5% could lead to 25-130% increases in profitability depending on the industry.
If you start to consider customers as more than just a sale, and introduce the possibility of them coming back time and time again, you can increase their lifetime value two, three, or five fold depending on the length of their relationship with you.
The success of customer retention starts with the first contact a business makes with its customers, and continues throughout their relationship. Bain Capital has even estimated that for certain industries, a 10% increase in customer retention is roughly equivalent to an average of 30% more profit. As the first contact with customers sets the tone and initial interest between them, it’s important not only to keep customers engaged but also make sure their needs are being met, their trust retained, and that they continue being satisfied.
5. Build a scalable sales model
To create a sustainable and scalable business, you need to implement sales processes that can be successfully deployed again and again at growing, greater scales. It’s one thing to sign up customers; it’s another creating sustainable growth by implementing repeatable sales systems.
If your scalable sales model is successful, it should provide you with abilities like:
- Being able to hire new employees who produce a productivity level equivalent to their sales leader
- Being able to frequently and consistently increase the source of your customer leads
- Being able to consistently forecast both your sales conversion rate and revenue
- Being able to pay less on customer acquisition costs when compared to the amount the business will earn from the customer over time
- Being able to provide customers with the right products, at the right place, at the right time
A repeatable sales model is an important step in building the platform to scale. But it can take a lot of experimentation and intensive research before you find one that’s truly sustainable. Use our advice to find a sales model that’s right for you.
6. Be a flexible, adaptable leader
Each stage of business growth demands that its leaders change and evolve, so first they must grow introspective about themselves to know what kind of leadership is needed. This means being aware of their own strengths as well as the company’s needs in both short-term strategy goals along with long term ones.
Leaders must be able to embrace change, know when to pivot a business, and take on board collaborative feedback in order to position their business in a way that allows for a sustainable level of achievable business growth.
Ensure to keep analysing your business strategies on a regular basis to identify what works, what doesn’t, and what could be better. It’s a vital practice to make a habit too: according to Forbes research, companies that are able to analyse, adapt and successfully execute the data they hold outperform their competitors by up to 20%.
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