A business needs to grow like a body needs to breathe. Stall growth, and it dies. It’s not personal. It’s nature, and viewing your business as a living and breathing thing has many benefits. So, how much oxygen do you need to sustain, grow, dominate, or exit your business?
The silent killer
At a minimum, to retain the current value in your business, earned through years of risk and investment, you need to grow it at a minimum of inflation. Irrespective of politician’s promises, especially in an election year, assume it to be 5% for the year ahead.
Economic stewardship
Apparently, our economy will grow at 0.6% in the year ahead. Despite no cogent strategy supported by active policy implementation, let’s work with this number. “Hope and prayer” as a country growth strategy is better than none, right?
Industry dynamics
Your business exists in an industry, and its growth rate will differ from the economic growth rate. Companies in an industry are measured against each other to set industry benchmarks on growth, productivity and valuation, among other stats. For example, some industry forecasts reach 40% for non-alcoholic beer production. Office furniture has a forecast edging over 4.5%. Find yours from your trade association or an industry body. Let’s assume 5% for this article as the relevant industry growth rate.
Security in statistics
There is comfort in convincing your mind about the objectivity of a growth decision. The above elements sum up to 10.6%, representing the minimum growth rate you’d need to achieve to stand still. Put differently, to protect your years of investment, risk and effort, you need to grow your company by 10.6% in 2024 to maintain what you already have.
However, it’s not simple. You need to factor in some more nebulous factors.
Mindset matters
Not wanting to grow will have its roots in your lived experience. It might be due to previous growth efforts yielding unhappy outcomes. Too much stress, more risk, and little profit despite revenue growth. Such factors find their roots in your business design and leadership, remediable through mindset. We all, eventually, get trapped into an unconscious competence or automatic experience haze. After some time of running a business, most of what you do is akin to how you drive. For example, you drive and arrive at work each day safely but with no active memory of the journey to work. Automatic experience or unconscious competence is the term that describes this act. It also builds your habits, good and bad, in terms of how you lead, manage and act in your business. How you lead growth across your business development cycle needs to change for growth to yield satisfactory outcomes. Awareness of this is a vital personal leadership trait to unlock successful growth outcomes.
Deciding destination
Being clear on why you do what you do also plays a role. Shaped by purpose and intent, both weigh into shaping your answer. Purpose, centred on why your business exists within your ecosystem of suppliers, customers, employees and society, must be architected into measured evidence that you are fulfilling your purpose. Intent is personal. What do you hope to achieve as an individual due to your business? Should it be a legacy, then define it and give it a measure –a capital value of £100m in 15 years. Unless you bravely commit to defining a destination, you will likely drift about out at sea, the outcome of which will be disappointing. Be bold, be brave and commit to defining your destination. It’ll help add to your minimum growth rate.
Go-Getter’s
Finally, you live and breathe in a competitive market. If you are not thinking about growth, competitors are. If you are thinking about growth, competitors are planning growth. If you are planning growth, some competitors are implementing their growth plans. Talk is cheap, and it’s how you walk that matters here.
So, what is the correct growth rate?
To keep what you have and fend off your competitors, add another 3-5% to your minimum growth rate of 10.6%.
To grow and dominate a few segments in your industry, add another 3-5%.
A final thought – if you intend to exit and sell in the next 3-5 years, the three years before you exit are the most important growth years in your business life. Any buyer will view the future based on your recent past, not the potential you hope to sell them on. A growing company always attracts a premium valuation, and if you indeed have a destination that wraps purpose and intent into one, make, yet again, a bold decision. Add 3% or more to reach you big, bold destination.
