WHAT DO WE MEAN BY BUSINESS GROWTH?
Business growth refers to the measurable expansion of a company over time — most notably through increasing profits, whether by boosting revenue, expanding the customer base, or capturing a greater share of the market. Growth is driven by deliberate strategies such as product development, services development, market expansion, and operational improvements. It reflects a company’s ability to become more profitable — and, in the case of entrepreneurs, not only more profitable but often significantly larger in scale and impact.
Article by: Monique Sharland (CEO)
WHAT TYPE OF BUSINESSES CAN (AND CANNOT) BE SCALED?
Businesses with high scalability are typically in tech sectors, offer digital products and services, or use online platforms, such as software-as-a-service (SaaS), eCommerce (especially drop-shipping), online education, and digital content creation. These models can grow revenue significantly with minimal proportional increases in costs and resources by leveraging automation, outsourcing, and digital reach to serve a larger audience.
Businesses that cannot be scaled are typically service-based businesses where the owner’s time is the primary resource, such as a local accounting and tax firm or a consulting service, and businesses that rely on a limited resource or a unique, fixed location.
Examples of Businesses That Struggle to Scale
Personal Service Businesses:
These are businesses where the owner’s time and personal expertise are the core offerings, making it difficult to serve more clients without hiring and training more individuals. If the owner cannot delegate core functions or processes, the business is capped by their individual capacity.
Businesses with Limited or Unique Resources:
This can include a business tied to a particular, exclusive location or a business with a finite supply of a specific product or raw material.
Businesses with Inadequate Systems:
A lack of repeatable systems, such as a lack of scalable marketing, sales, customer service, and operational systems can prevent a business from handling increased volume. A scalable business has processes that can be replicated and applied to more customers without starting from scratch each time.
Businesses Requiring High Capital Investment for Each New Customer:
If each new client requires a large capital outlay or significant new resources, the business will grow rather than scale.
Businesses Lacking a Vision for Scaling:
Some owners may not have the vision, skillset, or desire to change their business model or operations to accommodate growth.
KEY DIFFERENCES BETWEEN ENTREPRENEURIAL GROWTH AND BUSINESS OWNER GROWTH
The key distinction between how entrepreneurs view business growth and that of business owners can be summarised as follows:
- An entrepreneur builds new ventures by challenging the status quo and taking significant risks for expansive growth.
- A business owner manages an existing business to achieve consistent, stable growth, often with a focus on efficiency and profitability.
The main difference is that entrepreneurial growth is driven by innovation, disruption, and high-risk expansion, while business owner growth focuses on stability, efficiency, and incremental growth within an existing system. Entrepreneurs aim to create something new and scalable, often with a focus on nationwide or international reach, while business owners typically manage an established business model, prioritizing sustainability and lower risk.
Entrepreneurial Growth:
- Focus: Innovation, disruption, and creating new markets or products/services.
- Risk Tolerance: High; willing to invest in unproven ideas for potentially large rewards.
- Scale: Aims for widespread and rapid growth, potentially expanding nationally or internationally.
- Motivation: Driven by a desire to solve problems, capitalize on opportunities, and push boundaries.
- Example: Launching a groundbreaking startup or a new business model.
Business Owner Growth:
- Focus: Managing day-to-day operations, ensuring efficiency, and maintaining profitability within a known business model.
- Risk Tolerance: Low to moderate; prefers stability and takes calculated risks with backup plans.
- Scale: Seeks sustainable, incremental growth and often stays within their established domain.
- Motivation: Aims for long-term sustainability and often works with proven systems to generate income.
- Example: Owning and operating a retail store, franchise, or service-based company.
FINANCIAL PLANNING PART 1: THE ROADMAP TO SUSTAINABLE GROWTH
With all things in life, adequate preparation is key to success. The same goes for starting a business – without proper planning and preparation, the potential growth and ultimate success of your business venture will be jeopardised.
This is where the financial plan comes into play – a crucial document that forms part of your overall business plan and outlines the financial strategy of your new business or the growth of your existing business.
A financial plan is not a business plan. A business plan is a comprehensive document outlining a company’s overall vision, operations, marketing, management, and financial projections. A financial plan is a crucial component of a business plan that focuses specifically on the money side. Typically it should include, but is not limited to, the following components:
- Personal goals of the business owner (short-term and long-term)
- Financial goals and objectives ….. (how is the business going to achieve your goals)
- Start-up costs and funding sources (new businesses)
- Additional resource costings – marketing, employees, rent, etc. (scaling business)
- Income statement projections (profit and loss)
- Balance sheet projections (assets and liabilities)
- Cash flow projections
- Risk analysis and mitigation
- Determine funding needs (to start or to scale a business)
- Investment and lending strategy
- Emergency planning
A financial plan enables the entrepreneur to consider the financial feasibility of the business, set a path of detailed actions and then track the trajectory of the business to achieve specific goals, which could range from monetary growth to product expansion.
In the next two editions of the BAN Buzz, we’ll delve into the components of a financial plan in more detail and consider tips to prepare your own effective financial plan.
Article by: Madeleine Pretorius CA (SA) – franchisee owner, Paarl, Western Cape