The fundamental goal of any small business should be consistent growth, but what does this mean exactly? There are two primary categories to look at measuring business growth: organic and inorganic. Find out the difference in our guide below, along with the best metrics and strategies to use.
What is organic growth?
To begin with, we’ll answer the fundamental question: what is organic growth? This term refers to all internal growth stemming from a business’s existing resources. The company expands operations and grows the company from within, without any need to borrow money or seek outside help. This type of growth is most typically seen during the first stages of a new business, when the company’s relying on its own resources to start generating profit.
By contrast, inorganic growth uses outside investment or tools like loans and mergers. While organic growth is slow and natural, inorganic growth can fuel more rapid expansion with an injection of outside capital.
Organic growth examples include things like offering new products, diversifying your product line, and reaching out to new customers. You might try a new sales and marketing approach to drive growth without outside influence. Additional organic growth examples could include using existing technology to fuel revenue, or reallocating resources for greater efficiency.
Advantages of organic growth
There are numerous advantages of organic growth, including:
Faster production rates
Wider market reach
Improvement to cash flow
By using internal resources to fuel growth, business owners avoid growing liabilities and taking on new debts. They also maintain total control of the company by avoiding a merger or acquisition.
Measuring business growth
There’s a multitude of metrics you can use to measure growth, so which of these tools are most applicable to organic business growth? Here are a few metrics to track:
Year-on-year revenue growth
Quarterly revenue and earnings growth
Comparable-store sales over time
Tracking revenue and earnings from one period to the next shows investors how well a small business is attracting new customers and driving sales. This shows if internal marketing methods are paying off.
When it comes to measuring business growth, you can also take an in-depth look at how well customers are responding to your brand. Here are some additional metrics to use when measuring organic growth:
1. Percentage of customers likely to refer
A common question on customer surveys is how likely the client is to recommend the company to others. Small businesses with a higher net promoter score show that they’re successfully connecting with existing customers, which is likely to spur organic growth.
2. Percentage of customers likely to repeat purchase
Another survey question to assess organic growth is how likely the customer is to purchase the same product or service again. High scores indicate that the business is likely converting first-time buyers to repeat customers, growing brand loyalty and revenue without outside influence.
3. New sales to repeat sales ratio
While the two metrics above show how likely a customer is to repeat their purchase or provide free word-of-mouth advertising, this offers a more concrete measure. New sales are typically the result of marketing and sales outreach. Yet it’s difficult to achieve sustained growth without repeat sales, which is why this ratio is handy to look at.
Strategies to drive organic growth
If you’re looking for more ways to improve organic growth metrics, here are some commonly used strategies to try.
Optimise your pricing strategy
Retarget customers with PPC advertising
Reallocate resources into producing top-earning goods
Create new goods based on customer feedback
Because they may not have the financial means to pursue all strategies at once, it’s best for small businesses to focus on one strategy at a time. Keep a close eye on metrics to determine which strategies are paying off for a custom growth plan that works.
We can help
GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.