Growth is the stage that occurs after starting up. The growth stage is one that is essential for long-term survival!
Growth is defined as a stage of the business cycle that occurs beyond the start-up stage, where there is increased competition and greater market share. If we compare the stages of business cycle to life, the growth stage is most closely comparable with passing the toddler stage, to becoming a child- revenues and customers are increasing with many new opportunities and challenges and competition surfacing. It is considered as part of the development stages of a business lifecycle alongside the idea and the start-up stages. The growth stage is one that is essential for long-term survival!
Growth vs. Expansion
While growth is the stage that follows the start-up stage, where the business is finally standing on its two feet, expansion is often the choice of the business owner to gain a larger market share and find new revenue and profit channels. Growth focuses on running the business in a more formal fashion to deal with increased sales and customers, while expansion is mainly concerned with adding new products or services to existing markets or expand existing business into new markets and customer types.
“While growth is the stage that follows the start-up stage, where the business is finally standing on its two feet, expansion is often the choice of the business owner to gain a larger market share and find new revenue and profit channels.
Importance of a Growth Strategy
The truth about businesses and their cycles.
If we say that as a business owner, your business follows the same path as the vast majority of other businesses- that will mean your business is going to fail! Keep in mind that 50% of new businesses close within three years, while 70% fold within ten!!
Should your business beat the above statistics and survive, the path of survivors means a lot more hours and not always more money! So why do we decide to start our own business venture, if it does not always means that by growth we will make more money?
Underlying reasons why growth is essential for a company’s future.
Growth is essential for long-term survival and each entrepreneur that starts a new venture must keep that as part of their initial business plan and constantly evolve within the development of each stage of the business.
Focusing on a growth strategy, keeps everyone in the company focused on the goals and aligned for success.
Determining long-term value of the company (what someone in the future can earn from the company, i.e. heir, successor). Growth is a major ingredient in the valuation of a business.
Growing companies are easier to sell, than a company that is stagnant.
Growing companies are also easier to buy- buyers are purchasing the future and are doing that out of a growing cash stream and hence will pay a premium for a growing company.
Our Models & Philosophy
At Bahrain Development Bank (BDB) we believe in encouraging entrepreneurs to scale through the development path and achieve growth.
We follow and implement “The Entrepreneur’s Path” model in our daily interaction with entrepreneurs, a model that outlines the route that an entrepreneur ideally will follow throughout the business cycle, containing the following stages:
Idea Generation Stage.
Business Planning Stage.
Processing Documentation Stage.
Start-Up/Operations.
Expansion/Growth Stage.
To Grow or not to Grow?
Long-term sustainability and to beat the odds of being part of the 50% statistic of failing in the first three years – growth strategies need to be in place. A non-growing business is easily taken down by the slightest change i.e. the owner gets ill for a few weeks, the computer crashes with all the information to run the business. Therefore, growth is imperative for every business, if a business like anything else in life stops growing, it will remain stagnant- and face a weakening balance sheet- leading to possible external funding requirements. If you are stable and doing well, why grow? Because it is impossible to just hold a steady state, you will either grow or start to shrink, so to sustain yourself, you must GROW!
“Despite the importance of growth strategy for success, SMEs when polled admitted to not outlining them. SMEs avoid implementing growth strategies because of two main reasons: cash and creditors.
Why do some businesses choose not to grow?
Despite the importance of growth strategy for success, SMEs when polled admitted to not outlining them. SMEs avoid implementing growth strategies because of two main reasons: cash and creditors. Business owners associate implementing growth plans with high costs, and in some cases are dependent on external funding to help them kick start their business.
Why some businesses will just not grow?
Upon considering growth strategies, quite often the business owner chooses to remain a small business and never passes to the growth stage, perhaps choosing to remain operating as a sole proprietor. In other cases, the venture could remain small for the simple fact that not all small ventures can or will become big companies. They are not fast growth potential because there is not enough room in the market for growth, their production and management systems are not scalable. They will not scale because it is too great of a challenge to the management.
Growth- Final words
Implementing growth strategy can ensure that a business will not remain stagnant; therefore, growth strategies should be part of the business plan and should be an exercise that is reviewed periodically to be updated according to the business status and market trends. Once a growth strategy is implemented and nurtured SMEs will be able to see their results by the ability of the business to compete in a tougher and possibly larger business environment, while ensuring long-term sustainability and economic value by entering new markets, exporting, introducing new lines of business, or expanding through new branches. SMEs should not hasten growth as it can cause greater issues in the long term. A growing business is not always a profitable business! Do not exchange long-term profit for short-term growth.
With growth, patience is a necessity and should be a virtue all business owners hold while waiting for growth results.
