Types Of Business Growth Explained

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Types Of Business Growth Explained

What are the different types of business growth? Read on to find out.

Business growth is a legitimate part of the process for a business to expand. When a company seeks additional support to grow and generate capital, it is growing. The growth of a business organization is reasonably comparable to that of a tree, which passes through the stages of being just a seed, plant, and then a full-blown tree that provides many benefits.

Countless businesses start small and become huge because of constant growth. Nevertheless, business growth is not an easy process. The frequency and pattern of growth contrast from one business to another. Some companies see growth at a rapid rate, while others do not so rapidly. Also, not to mention, not all businesses see the end of the day. Some die under pressure and in different circumstances. This may happen either due to the nature of the organization or the businessperson.

In this article, we will explore business growth in detail. We will also discuss different types of business growth. Let’s get started.

What Is Business Growth?

business growth

Business growth is essentially spreading out of a company in one or several ways. In this day and age, there are numerous ways and opportunities for a company to pan out. If something is changing in the company, be it assets, revenue, employees, if we can measure and define it, then we can determine the change and growth happening in the company.

An increase in business sales and growth of the company is a major motivator for people to keep going. However, some organizations do not have sales growth as their top priority. For them, pleasing customers and retaining their employees is the top priority.

For reassuring business growth, ideas, plans, and goals should be in orientation and harmonizing with one another. In reality, a growth plan should always be a part of a business plan from the initial get-go. It should be implemented from the start till the very end, and it should be modified as per the needs and stages that the business is in.

Metrics Used To Measure Growth

Several measures signify that a company is growing:

  • Revenue
  • Profits
  • Company evaluation
  • Sales
  • Number of customers
  • Number of employees

Businesses can show growth in several of these metrics but not in each. For instance, revenue can grow without an increase in sales or increase in customers (only if the increment is generated by the existing client base, which is generating more sales). It’s also possible for one criterion to increase while the other continues to decrease, e.g., sales are going up because of a decline seen in the product’s price. The overall revenue of the business could still be falling.

This suggests that outlining definite growth can be a difficult task. Companies considering to grow their businesses should define their business goals to find the growth metrics they are looking for.

This could suggest doing everything to escalate the total number of consumers, even if it means making a loss in the initial phases of business growth. However, other businesses will profit from gradually increasing the sales and the revenue to safeguard money.

There are different measures to grow a business. Here are different types of business growth to help you find where to focus.

Types of Business Growth

types of business growth

Organic Growth

Organic growth is usually the easiest and most natural business growth. It is also a broadly predictable and popular one and is also one of the most effective methods.

Organic growth involves noticeable and real company growth stretching from the production of new products to expanding a physical store to a new location. When additional products or services are on offer, and sales go up, organic growth often requires more physical space to serve newer customers.

For start-up businesses or small businesses, organic growth is a great strategy. Organic growth is when a company increases revenue as a result of using existing resources to generate sales. Still, it is important to mention that organic growth strategy is not viable for the long term.

This is the simplest type of business growth, but it is the most effective way of growing your business as it uses its resources. Organic business growth emphasizes more on increasing manufacturing of products or services and using existing assets and capital for the success of the business.

Companies concentrating on organic business growth lean towards expanding to a larger store to get more product production. The businesses focused on growing organically should focus on enlarging in every aspect to provide accommodations for their requirements.

The increased production or expansion in space accomplishes consumers’ growing demands and averts any shortages of the products. Organic business growth is not a sustainable growth strategy for any business, but it is undoubtedly helpful to take the business to the next step in the initial stages. If current products or services are sold in different demographics, and to a new customer base, the company should devise an advertising campaign or hire a new team to handle new sales generation.

Strategic Business Growth

Opposite to organic growth, strategic growth is one of the types of business growth that gives more emphasis on long-term growth. A strategic growth system is an excellent choice after the successful stage of organic business growth. It is crucial to go through organic growth before entering the strategic growth stage because of the resources required to achieve it. Preferably, after going through the organic growth stage, the company would have made sufficient funds and revenue to take the business further and grow into different stages.

When first starting the business planning, the entrepreneurs should always take strategic growth into contemplation. A strategic growth strategy can vary from launching new products or services for a product line to marketing strategy modifications aiming at specific demographics or conducting new studies.

Strategic business growth focuses on the long-term growth of the business. The businesses which concentrate on strategic growth have achieved their ultimate point of organic business growth.

One of the objectives of this type of business growth is to explore the untapped market. All you need to do is realize the value of advertising power and increasing production value or expanding horizontal or vertical integration. The capital required is generated on or after organic business growth. As this stage will not provide instant results but will be beneficial in the longer run. This business growth is an inevitable phase for any business.

It is beneficial for businesses that have touched a plateau in their journeys and are unable to grow anymore. It is a way for organizations to expand by planning at every stage. This can include strategies like expanding to a new location, growing product line, tapping a different demographic, customer acquisitions, etc.

Internal Business Growth

This is another one of the most popular types of business growth. Internal business growth is both easy and hard to stimulate any business. This growth strategy for any business asks for the use of already existing resources. It regulates how they can be helpful in an improved way rather than just looking externally to increase production. This type of business growth may comprise of a sleek system for applying business or workforce automation.

Some businesses may find it hard to use internal business growth strategies as it is not similar to expanding to a new business market or expanding a product line. Still, on the contrary, the businesses opt to change their workflow entirely, and that course can be terrifying to the current employees. Learning new things and ways in which a company will operate is bound to frighten people.

 Sometimes, as an alternative to choosing between strategic and organic growth, internal business growth is a better mid-way to upsurge resources without spending capital considerably. A lot of the time, it is seen that internal business growth helps corporates cut down resources and endure the growth simultaneously. This business growth is noted as a practical way of growing. Two widespread ways for internal growth are vertical integration and horizontal integration.

Vertical integration is when the company adds new products to the existing line of products. In contrast, horizontal integration is when the company expands to a parallel line of products. Such as when an air conditioner company starts expanding to the refrigerator market. This helps in capturing a bigger share of the market.

The key goal of internal growth is to optimize and make the most out of already available resources. Even though internal growth may initially seem intimidating to team members, it is considered worth the effort to achieve optimum usage of existing resources.

Partnership Or Merges

Many companies may go for a merger, acquisition, or partner up to grow their business. All these strategies are the diciest of all the strategy types and the strategy with the maximum potential for returns.

This strategy can enable easier access into a new market while expanding a prevailing customer base. Moreover, stretched-out production abilities can make the manufacturing and launching of new products pan out much more effortlessly.

A further prominent benefit of implementing an acquisition, partnership, or merger is the increased capital which will help improve the company’s potential to innovate and surge the likelihood of business success through collective efforts.

A well-thought-out and executed merger or acquisition will help the business to arrive, sustain and grow in a new market and add other already existing customers of the acquired company to their business. It will also help to produce more products and resources. Mergers or acquisitions also help one business to gain customer loyalty from other companies.

Rapid Growth Strategy

As the name suggests, rapid business growth is the best option to consider when you want to grow in a short time. Throughout this period, the manufacturing levels, clienteles, or even employees increase significantly, leading to specific threats and challenges. Shortage of capital, operational insufficiencies, or lack of customer services is an issue for every rapidly growing business.

Spikes in sales and revenues that frequently surpass the hopes of the business owner are the main characteristics of rapid-growth companies. You can achieve this growth by matching the right product or service to the market’s need, at the right time and the right worth. The growth is sustained by demographic and specific approaches and builds upon client relationships, allowing the business to gain an advantage over the competition.

If the rapid growth happens when it is not planned for, the business might not have adequate working investment. This is because this type of growth can demand greater expenditures for employees, manufacturing, and facilities. A business experiencing rapid growth has high goals, and it’ll rapidly improve customers growth. Some companies might have to take a debt to facilitate all the growth they are experiencing. To achieve rapid business growth with minimal risk, you might also look at acquiring another business.

Conclusion

Business growth is essential for achieving profitability and scaling the business. Entrepreneurs should figure out if their business is ready to grow or not. If hurried into things and not considered every aspect of going forward, it may do more harm than good. Cultivate a business strategy that will help you in the long run, consider factoring in your circumstances and choose what will best suit your employees and your customers. This will help you sustain your business for the longest and see growth.

Have we missed anything or have any questions? Get in touch

If you enjoyed reading this, don’t forget to share.

You might also enjoy these popular startup growth-related articles What Is Market Penetration Growth Strategy?, Key Metrics For Startups Explained and Steps To Successfully Expand And Scale Your Business on the same topic.

Scaling Partners – Who We Are

At Scaling Partners, we are experienced at scaling startups. 

Scaling Partners helps you bridge the knowledge, process, and gaps in your business. Connected services. Hands-on solutions. Real experience. 

We know business growth isn’t easy. But we make it easier. Faster. More sustainable. How do we do that? By partnering you with the processes and insight you’re missing and the people who’ve been through it all before. And because we do it as a service, it’s brilliantly affordable.

Learn more about how we support startups with their growth and International Expansion.

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