Rate of expansion. If you’re interested in building a multinational conglomerate, organic growth may not be the best approach for you. If you implement core, or externally based, growth strategies successfully, you have the potential to achieve phenomenal growth in a limited time frame provided you have the financial and technical resources to do so.
Rate of return. It is unlikely that an organically growing business will achieve the same level of profitability as a successful company that expands via core growth. A core growth strategy isn’t for everyone, but it may be right for some ambitious and experienced entrepreneurs.
Like plants and animals, businesses aren’t always positioned to grow. The startup phase is the part of a company’s life cycle that is perhaps most interesting but is also most difficult in many ways. This is the time when you’re figuring out how to do what you do and how to get customers to respond to it. The organic growth that takes place during a company’s startup phase may come in fits and starts as you make rookie mistakes and also discover untapped potential.
Startup organic growth can come from refining your business model to make your company more profitable, developing products and services that showcase your strengths and attracting loyal customers who will sustain you into the future. Once your business operations stabilize, you may experience a period of growth in which organic expansion occurs smoothly and relatively effortlessly or as effortlessly as anything occurs when running a small business.
In this mature growth phase, you’re no longer doing the hard...
Cash is a vital concern for any business, especially startups.
Startup capital: Having enough capital to start a business is usually the first problem of entrepreneurship. Entrepreneurs tend to underestimate starting expenses and overestimate growth of sales. Businesses will typically run negative cash flows during the early months that will consume startup capital.
Even after the business begins to generate positive cash flow, the owner has to make sure that money goes for the right expenses and does not get wasted.
Sales: Nothing happens without sales. Developing a solid, stable customer base is essential when starting to build a foundation for growth. Identifying and reaching the right audience takes focus and effort. It takes time to strategize and create a campaign to attract the target market. Even when you have the best products or services, it is still possible to fail if you do not have a loyal customer base.
Marketing: Figuring out what is going on in the minds of consumers is always a bit of...
Once your business matures, you may have difficulty maintaining the rate of organic expansion that you achieved during its growth phase. Although it may feel like your business is declining because you aren’t maintaining the rate of rapid expansion that you experienced during the previous phase, you may actually be stabilizing and drawing on the foundation you already created.
A mature company may not show much organic growth simply because it is at a stage in its business life cycle when aggressive growth isn’t necessary. However, if your sales start to drop off sharply, or you begin to lose market share, it may be time to start reinventing your brand and reinvest in the organic growth cycle.
Organic growth strategy advantages and disadvantages often come down to what you hope to achieve from running your business and your personal and professional vision of success. Not every entrepreneur needs to operate on a global scale or earn millions of dollars. You may be...
Autonomy. Although some organic growth companies do bring in investors, this strategy requires considerably less outlay than externally based expansion, making you less beholden to other stakeholders who may not share your vision. If your organic growth is slow and steady, you may be able to finance it entirely with your own credit and resources, freeing you to run your business entirely as you see fit.
Sustainability. It’s easier to maintain an organic rate of growth than a trajectory geared toward external expansion. If you’re looking to build a human-scale business rather than a juggernaut conglomerate, an organic growth strategy will be easier on your finances and most likely on your personal life as well.
Reduced risk. The risk involved in an organically growing business is measured risk because expansion is incremental, and such a strategy builds on existing strengths and resources. You’re investing in what you know rather than borrowing to merge your company with an unfamiliar entity.