7 Most Important Reasons for Business Growth

Conventionally, people ascribe business success or failures to fate/chance or certain environmental conditions including family background. Even though one could not entirely rule out the influence of environmental factors, the entrepreneur’s positive attitude, discipline, skills, competences , resilience and experience are real factors determining the transition of an enterprise from startup to a fully grow or diversifies venture.

Business growth is the process of making a business bigger and more successful over time. This can be achieved in a number of ways, such as increasing sales, expanding into new markets, or developing new products or services.

Some justified reasons for business growth  refers to the increase in a company’s size, revenue, market share, and profitability over time. This can be achieved through a variety of means, including expanding into new markets, developing new products or services, and increasing sales.

Imagine a small shop that sells homemade product. The owner decides to expand the business by opening a second location in a nearby town. This new location attracts new customers and helps to increase the overall revenue and profitability. As a result, the business is able to invest in new equipment, hire more employees, and expand its menu to include new items. This type of scenario are justified reasons for business growth.

We all know that businesses want to grow. But did you know that companies can grow in more ways than one? And that some ways are faster than the other? Read along to find out about the different justified reasons for business growth and how they differ from each other.

Here Are 7 Most Important Reasons for Business Growth

How do you know a business has grown? How do you know a business has attain its success? Why is business expansions  important for the owners. Let’s take a look at the most important reasons why business owners will always want to grow their businesses:

1. Higher status and wider recognition

Recognition is more meaningful when tied to a specific accomplishment or business objective.

People within the industry respond to appreciation and recognition of their work. For example, when employees are recognized for their work, productivity increases. This can lead to better work and more profits for a business.

Controlling a large and well-known business gives the owners and directors higher status and wider recognition in the society.

2. Increase in sales and high customers margin

Increase in sales and high customers margin are some of the important reasons for business growth. Businesses grow by selling more products, either by selling more to existing customers, or finding new customers. A company grows in size after it has increased its value of annual sales. However, the growth in the value of a business’s sales does not automatically increase its market share.

3. Increase in market share

An increase in market share is also one of the important reasons for business growth. With the increase in market share, the company will gain higher profile and more market power. This will allow the firm to charge higher prices, therefore will increase sales revenue and gain more profits at the same time as costs remain unchanged.

The business will have greater bargaining power with suppliers to negotiate lower prices for raw materials which will lower the cost of production, and retailers to grab best display positions in the shops. And this will make it easier and less risky for the business to continue to growing by launching new products onto the market as its brand becomes more widely known.

4. Increase in output or profit

Profit is money that is earned in trade or business after paying the costs of producing and selling goods.

Higher profit justified the growth of business and it enables firms to invest in more research and development, leading to better products in the long-term. Higher profit also acts as a signal to other entrepreneurs to increase investment in that industry.

Expanding businesses and achieving higher sales is one of the ways of becoming more profitable.

As we know, business growth results from an increase in output which is goods produced and services provided. If this output is sold, then sales increase. Increased sales, when prices remain unchanged, will consequently increase sales revenue.

In order to continue to increase profits while expanding, the business should keep its costs under control. Keeping the costs at the same level as before expansion, or keeping the growth of costs less than the growth in sales revenue, should also increase profits.

Read – 9 External Environment Factors Affecting Business

Two Main Types of Business Growth

The two main types of business growth include organic and inorganic growth. The type of business growth chosen by the company will determine its business growth strategy. Other types of business growth include: Horizontal Integration.

Organic business growth

Organic business growth happens when expansion happens from within the company. It is the increase in the number of business units, expansion in the product range etc.

The organic growth strategy depends on the company’s resources and capabilities. The following are the most common organic business strategies:

  • New product offerings

  • Reallocation of resources

  • Investing in new technologies

  • Process optimization

Organic growth ensures owners of their company’s control. This is a much slower process compared to inorganic growth.

Inorganic growth

Inorganic growth  happens mainly through mergers and acquisitions and is a faster way for companies to grow.

Acquisitions increase market share and boost a company’s earnings. Opening new stores and branches are also part of inorganic growth.

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