Growth in business is the natural evolution of a company, often correlated with increased revenue, more customers and greater profits. Many investors, entrepreneurs, and employees view growth as a goal. However, it’s not without its challenges.
Business growth can take on many forms, including organic and inorganic growth. Organic growth is achieved by a company through its own efforts, and inorganic growth is accomplished through mergers and acquisitions. Other ways to grow an organization include diversifying products and services or increasing production capacity.
The benefits of economies of scale can help businesses reduce their costs through the production of higher volumes of services or goods, which reduces the unit cost per item. However, diseconomies of scale can also occur as a result of growing the size of a business to an unsustainable level that could result in excessive spending and economic downturns.
A company that experiences rapid growth faces a variety of challenges, from expanding to new locations and hiring more workers to navigating the increasing profits. To be able to achieve business growth companies must formalize its management practices with tools such as budgets and strategic planning. In addition, the business must be able retain its entrepreneurial spirit even as it grows larger.
In most cases, when a company grows, it is able to diversify its offerings, which can be beneficial to its long-term success. A bakery that has the restaurant on its premises, for instance can shield itself from a drop in the bakery business by balancing losses in one area by making money in another.