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Have you ever heard of an entrepreneur establishing a business to make ends meet and not for business success? Of course not!
Businesses start with BHAG vision & goals for business success. All entrepreneurs dream of belonging to the top tier of the business cycle. While it’s a great dream turning it into a reality is a different ball game.
Growing a business needs the right intellectual assets, strategic alliances, services or products that cater to an unmet consumer need or fill a market demand gap. A solid operational core is required for business sustainability to reduce long-term risks.
Let us start by understanding Sustainable business growth and how one measures it.
So what does sustainable growth mean?
Sustainable growth for a business is the growth that an enterprise can attain pragmatically without encountering complications. A company that develops too rapidly may struggle to finance its expansion. A company that evolves too slowly or not at all is bound to stagnate sooner or later. The goal is to discover the optimal growth rate. This balance point where growth meets resilience is business sustainability.
And it is the magic potion for a business’s long-term success.
What is a sustainable growth rate?
A sustainable growth rate (SGR) is the maximum growth an organisation can attain without requiring outside financial assistance through equity or debt to fund its expansion.
The significance of a sustainable growth rate
Irrespective of the business size SGR is an important parameter to gauge the stage of a company’s life cycle, assess risks and their impact. SGR helps forecast the company’s long-term expansion and facilitates the identification of resource availability to meet its performance targets, allowing maximised revenue growth and profitability without increasing its budgetary leverage. SGR helps determine their sustainability level without taking out a bank loan or dipping into their savings. Furthermore, it assists businesses in determining monetary sufficiency to meet organisational objectives.
Finding a sustainable growth rate for an organisation can be complex, as it involves evaluating external variables which may impede growth. External factors include social, economic, and market dynamics.
I recommend the following actions to keep up the momentum of business success in an enterprise:
Adopt an entrepreneurial attitude
“Entrepreneurship” is a lifestyle. It is about developing an ability to sniff out and make good opportunities before anyone else. Developing an entrepreneurial mindset enables one to explore new pastures and go beyond the conventional. It helps create and gain new markets or earn an edge in the current market space.
To have a great business success, be a great leader.
The most effective leaders make intuitive decisions and have an optimistic perspective to recognise the potential in everything. Great leaders grow resilient to challenging circumstances and are incredibly intuitive about formulating strategic, long-term future goals with time and practice.
A great leader accepts that it can be lonely on the top and is open to seeking help from peers and business & executive coaches. A great leader is more often made rather than born.
Invest in the dream team
A business is created for the people and by the people. Building a sound foundation or being successful is impossible without the right people. First, Hire Right! Hire People with value sets that align with the organisation and hire for the skills needed for the job. Next, invest in people. Skill, reskill and upskill. Lastly, appraise the organisation’s competencies and ask the key questions: Is the present talent pool serving the clientele and generating the best prospects for market growth? Are they embracing their ardent aspirations and unleashing their limitless potential? Are they bringing their A-Game to the field?
Workforce planning helps boost employee retention, identify and recruit top talent, recognise weak areas, and optimise the workforce expenditure. Furthermore, it can help a company cope and adapt to a constantly evolving market.
Don’t flee from risk; befriend it.
Embrace risks to maintain the momentum and continue to grow. Risk is an integral part of every business initiative. It is important to evaluate risks and put a mitigation plan in place. The mitigation plan is a living document that is updated on an ongoing basis to ensure sustained growth.
Elements to keep an eye on when calculating SGR?
Attaining the SGR is the aim of any business. However, various obstacles might hinder the company from expanding and reaching its SGR.
- Market dynamics and economic conditions: can either make their way to achieving a company’s long-term success or break it. Consumers with limited surplus income are more likely to be frugal with their buying, making them demanding and hard-to-please purchasers. Companies battle for these clients’ attention by slashing costs, thereby impeding growth. Companies also spend on new product development to retain clientele and increase market share, this in turn limits the company’s capability to grow its SGR.
- Business predictions and planning: if not done right, can limit a company’s capability to accomplish long-term sustained development. If long-term planning is inadequate, an organisation may achieve rapid growth in the short term, but the probability of long-term sustenance would be unlikely. Companies sometimes conflate their growth plan with their growth potential, incorrectly calculating their ideal SGR.
- Companies must be open to investing in themselves over time by acquiring fixed assets such as property, plant, and equipment (PP&E). As a result, the business might seek funding to finance long-term development through investment.
- Finally, keep up with your competitors. It is critical to create a fair assessment and relevant benchmark to compare a company’s SGR with similar businesses in the same industry.
Regular SGR evelaution helps keep track of the enterprise’s growth rates. The leader needs to be mindful of the same. Once sustainability becomes the core of an organisation’s guiding principles, it is better equipped for long-term business growth and ahead of the competition to reach the top.
- Sustainable growth is the realistically achievable growth that a company can retain while dodging obstacles and still generating a healthy profit.
- A sustainable growth rate assessment is a must for a business to achieve optimal results
- Strategy and Growth capability must be devised keeping the SGR in mind.
The 4 elements mandatory for sustainable business growth are:
- Adopting an entrepreneurial attitude.
- Possessing and projecting strong leadership skills
- Recruiting the right talent.
- Embracing risks as they come along.
The 4 common obstacles one may face when growing sustainably are:
- Market dynamics and economic
- Improper Business predictions and planning
- Not having sufficient funding facilities
- Not aligning and comparing your growth with those in the same shoes as you