The Nature of Growth – From John Young

One of the driving factors in profitability of a business and the market value of that business is growth. It may be historical growth; it may be predictable growth; or it may be growth potential. Historical trends in the industry, or of the business itself, tell the immediate story; but, companies typically grow in one of three ways.

First, they are carried by the industry wave, meaning that when the entire industry grows, companies within that industry tend to grow, too. This direct relationship is normally dependent upon a well-organized, funded and managed company. Occasionally, a less than well-performing business may prosper; but, when the wave breaks, there can be havoc. It could eb best to re-evaluate your business plans and be proactive in the market and not reactive. One way of accomplishing this is to reinvest some of those newly gained profits back into the business structure. Sure, enjoy some of the benefits now, but plan for the future.

Second, they take market share from competitors. Reinvesting in your company, adding new equipment, increasing sales and marketing, hiring innovative managers or simply creating a team approach with employees for new solutions can stabilize a company to whether the upcoming challenges created by growth. Survey customers and find out what they are really looking for and then provide it. That is the way to capture new customers.

Third, can you offer new products and services to existing customers and capture share from other companies and industries? Is this growth wave sustainable or is it a fad? In either case, you may be able to grow by acquisition of new product lines, new geographic markets, supplier lines or other.

Regardless of industry, a business model that dramatically accelerates growth often does so on the basis of sales (Internal efficiencies are another way; but don’t provide dramatic growth). Look for ways to increase the your company’s selling capacity. That may mean adding new sales reps, equipping them with the proper tools to sell efficiently, and creating an incentive structure that rewards growth. Increase your marketing budget. Evaluate your Internet presence. Can you expand your sales geography? All these factors are crucial to your growth and value plans. They are also critical to buyers who do not just buy the past but are purchasing the future.

 

 

John Young is a Broker/Investment Banker with Sunbelt Business Advisors. He can be reached at (408) 436-1900, ext. 103 or john@sunbeltbayarea.net