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When you start a business, you need to see some growth each year. What’s a good target for your business growth year on year?
Business growth is essential. Everyone will agree with that. The cost of running a business goes up, so you need to see your business consistently grow just to stay on track.
While there was the freak inflation growth after the pandemic, a lot of places are seeing inflation drop back to around 2% to 3%, although some parts of the world are still seeing higher inflation. Your business needs to match inflation just to stay on track with the world. What is a good target business growth then?
Start with 5% if you’re just starting out
When you’re starting out in business*, you’ll want to do something manageable but that still pushes you. A lot of businesses are going to start with debt, and it takes three to five years for a brick and mortar business to turn a profit. So, your initial focus is to build growth as quickly as possible. Online businesses will turn a profit faster because there are fewer overheads.
I tend to start with 5% target growth when I’m taking over or starting a new website. This gives me a reasonable target that can still be a push depending on the type of website that I’m running. If I do lower, then I’m not staying on track with inflation. If I go too high, I’m setting myself up to fail.
I then go up from there as I understand the website more and figure things out with it. My aim then is to get up to 10% growth each year.
A good business growth is 10% and up
A Harvard Business Review says that businesses should aim for at least 10% in business growth. Anything between 10% and 25% is considered a good growth. This is more than inflation and helps to bring in a healthy profit for the business.
While it would be great to see a business grow more than that, there is a danger in a business growing too fast for where it is in its stage of business. I think of the movie The Intern*, where the lead character played by Anne Hathaway points out that the company met their 5-year goal within months. The company grew too fast for itself, and it led to a lot of issues for the business.
So, you want to watch out for growing too fast. That’s why 10% to 25% is a good spot.
Of course, it depends on where you are in the business and what type of business you have. A website that makes money through advertising or affiliate marketing can grow much faster without issue than a website where you’re making and shipping products yourself. When you have to then buy materials to match the growth, cash flow can become an issue.
For me, 5% to 10% is above normal inflation and it helps to build a profit. Make sure your business growth* is maintainable and realistic.
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What sort of business growth do you want to see? Share in the comments below.