Business growth is such as broad term. For some, simply increasing their revenue would be considered growth, while others would measure the number of customers or clients they have. There are a few metrics to choose from and we will look at these below.
Simply put, increasing how much money a business is bringing in. Bear in mind that the revenue is also the figure before all of the costs have been deducted. Increasing revenue can be done in a few ways:
- Increasing the number of customers
The more customers a business has, the more revenue they are likely to generate. Assuming the average transaction price stays the same, increasing the number of customers you have will mean increased revenue.
- Increasing the average transaction amount
Even if a business doesn’t increase the number of customers, they can still increase their revenue if their customers spend more on average. This is why low volume businesses such as high-end watch retailers can have similar revenues to high volume businesses such as supermarkets – although they do not sell as much or as often, each transaction is worth way more.
Increase profit margins
This is one of the main metrics to judge a business’ growth – if they become more profitable, they become more valuable. This could mean reducing the cost of an item and keeping the selling price the same, or raising it. Or it could mean just simply raising the price. Either way, these increased profit margins will contribute to a business’ growth as the extra funds can be used for expansion.
A business may sell software such as visitor management systems and be looking to increase their profits on these. They could raise their prices or reduce the cost of developing and producing the software. By doing one or both, they increase their profit margins. Such a circumstance applies to all businesses and therefore an increase in profit margins means a business is growing.
Get more customers
Now an increase in customers doesn’t necessarily mean a business is growing, especially if their customer retention is poor, but increasing the number of people purchasing your products or using your services is one of the ways businesses grow, as well as being a sign of growth.
When businesses are starting, getting more customers is a top priority as it increases brand awareness which in turn leads to even more customers. This is usually done through marketing, getting the message out there about a business and driving more people towards it. The customers are the foundation of the business and once you have a loyal support base, you can then build on this by expanding your goods and services offered and increasing profit margins.