What is organic business growth?
According to Investopedia, organic growth is the growth rate a company can achieve by increasing output and enhancing sales internally. Organic growth, often referred to as “true growth”, can happen through price reductions, finding more customers, or boosting output to current clients.
What is inorganic business growth?
Inorganic growth occurs when a business merges with or is acquired by another business.
How is growth measured?
There are many ways to measure the growth of your small business. The key is to be consistent over time so you have accurate benchmarks. Define what success will look like and decide exactly how to measure it.
The concept of benchmarking is more formally described as “the process of comparing one’s business processes and performance metrics to industry bests and best practices from other companies. Typically measured are quality, time, and cost.” (Wikipedia)
Advantages of organic growth
Organic growth has a much smaller upfront cost than inorganic growth. Combining with another company to spark inorganic growth can be expensive and require a large outlay of money at once.
Organic growth is also more flexible. When business is going well with the support and money to expand, organic growth can increase. On the other hand, if you find yourself understaffed or with cash flow problems, you can scale back.
Disadvantages of organic growth
Growth achieved may be dependent on the growth of the overall market. If your industry is down, it can be hard to expand. Organic growth is also much slower than inorganic growth.
Advantages of Inorganic Growth
Growing your business inorganically involves joining with another business through a merger or an acquisition. This presents less risk than external growth and immediately expands assets and market presence.
Your line of credit will be stronger because of the combined value of the two businesses. You can also benefit from the expertise of the employees who join your organization from the other business.
Disadvantages of Inorganic Growth
When you combine your business with another, your management responsibilities increase dramatically. You’ll have more employees, more assets, and you may expand in ways you didn’t anticipate. Most mergers and acquisitions require outside financing, meaning a bigger debt load. If income doesn’t increase, you might find it hard to repay that debt.
Examples of organic growth
Many SmartBiz Loans customers are growing through internal organic growth strategies. Here are a few:
Adding new products or services
Asha Waterstreet owns Tasteful Additions, a shop in upstate New York selling gourmet salts and vinegars in store and online. Business was going well but Waterstreet knew she could up sales with additional products. With low-cost funds from an SBA loan through a SmartBiz marketplace bank, she added luxury body products as well as tableware to her line up. Current customers bought more merchandise and new customers were attracted.
Improving sales and distribution
SmartBiz customer Randy Jacques owns Southern Utah’s The Tree Guy. As his business grew, Jacques realized that he needed additional equipment to keep up with demand. He used funds from an SBA loan to purchase equipment and is successfully expanding across the state.
Increasing branding and promotion
SmartBiz customers Mary Grupka and Lisa Scibetta co-own Painting with a Twist (PWAT) art studios in New York. PWAT has an excellent reputation in the community and great word-of-mouth referrals. But Grupka and Scibetta knew they could better target their key demographic with additional marketing. They used funds from an SBA loan to launch more traditional channel marketing and creative events to introduce their brand to new audiences.
Strategies for generating organic growth
If you’re seeking organic growth, there are lots of strategies you can use. Here are just a few:
Identify and market to your target audience
This is important and should be firmly established in your initial business plan. You can’t successfully market to everyone. Make sure you nail down who wants or needs your product and identify how to reach those consumers. If your target customer is over 60, you might want to skip social media and concentrate on email marketing or more traditional methods. If you’re targeting parents, explore informative content blogging.
Focus on your unique selling proposition (USP)
Very few businesses are one-of-a-kind. Identifying and focusing on your USP is especially important when your product or service is similar to others in your industry. Check out effective USPs from giant brands like Avis and FedEx. Even with stiff competition, these corporations have set themselves apart from the pack.
Share KPIs with your team
If you share with your team and let them know your business goals, they’ll feel valued and will be more likely to be an engaged employee. Your employees can probably sense when things are not going so great or when they are. Honesty is the best policy. Share the challenges but when meeting goals and reaching KPI’s, be sure to share the wins. For more employee engagement ideas when pursuing organic growth, review 9 Effective Ways to Improve Employee Performance.
Use both traditional and digital marketing
Businesses that achieve successful organic growth use a combination of both traditional and digital marketing strategies.
Traditional marketing refers to any type of time-tested campaign with a proven success rate. Methods include print advertisements, billboards, TV, newspaper and radio ads. While a billboard might be out of reach, there are cost effective traditional ways to get your business out there. Simply posting or handing out flyers can elevate your brand in the community and bring in new customers.
Digital marketing includes advertising on social media platforms, maintaining a targeted website, establishing a blog, email outreach, and mobile apps. Our article, Digital Marketing for Your Small Business, can help you identify the best channels to pursue.
Organic growth isn’t mysterious. Approach this type of internal growth in a well-researched and systematic manner. Explore your industry to determine what your competitors are doing that works and doesn’t work is a great first step. You won’t have to reinvent the wheel or stumble blindly through strategies that are difficult or won’t get results. Consistency and research can help an entrepreneur meet organic growth goals.