Growth is essential for any business; if you are not growing, you are losing ground to your competitors. Why is growth important for a company? Growth can generate efficiency for your business; in some cases, you will have the ability to make better use of your workforce. Other benefits provided by the growth are the additional profits that can be used to increase the annual cost, such as employee salaries, public services, etc. Depending on your business line, you may be affected differently than a business in another industry.
There are also disadvantages in business growth that can make business less profitable and even destroy a business altogether. Rapid expansion carries the risk of making your business unmanageable, more expensive and less efficient. Depending on your business, the difference between growing 10% and growing 25% may require you to double your workforce since you will not be able to use your existing workforce to take on this new rapid growth. In addition, all this rapid growth in your workforce may require larger jobs, as well as additional administrative staff. Growth can also affect cash, especially if you have to invest in buying equipment or have to move to larger spaces.
Hopefully, you’re starting to see how such a move can erode your profits. This article is not to discourage you from seeking growth for your business; I only recommend that you do your due diligence when faced with this possibility. Rapid growth can have a tremendous impact on your business and the quality of your service or product. To analyse your growth capacity, consider the following:
- Determine your inactivity time rate by dividing your downtime by the total hours paid to your employees directly related to the generation of income.
- The inactive time rate will not only help you determine how efficiently you are using your workforce, but it will also provide you with information on how much additional growth the existing workforce can handle.
- If it is possible that your current labour absorbs growth, you can still deliver with the same quality, or the quality will suffer since your employees are expected to work harder.
- The structure of your company to support this new rapid growth plays an important role. Determine if you have sufficient administrative staff and the required workspace.
- Determine the additional capital expenditures required in relation to growth opportunities; the rapid expansion will tie a large amount of your capital, which can have an impact on the entire business.
In short, business growth is vital, can make your business a competitive, efficient and profitable force. However, the level of growth depends entirely on your type of business, the capacity of your workforce, financial resources and the overall structure of the business. The slightest miscalculation can have a negative impact on growth and profits.