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Strategies Of Growth And Measurement Of Business Growth

Every business expert or novice should know the strategies of growth and measurement of business growth because it is very important for business success.

Here are some of the ways by which business growth is measured:

  • Increased topline-gross earnings
  • Revenue
  • Greater product sales
  • Service income
  • Increased bottom line- net earnings
  • Profitability of operation
  • Minimising costs
  • Increase in customer profile
  • Increase in customers patronage
  • Credit worthiness.

It should however be recalled that business growth does not just occur. It requires planning. A deliberate planning is critical to business growth.

strategies of growth and measurement of business growth

STEPS TO PROFIT PLANNING

Since those factors that account for business success inevitably account for business growth, it may not be out of place to say that while discussing business growth, the business man should properly note the factors for business success. Some of the factors are:

  1. Developing a business plan
  2. A good knowledge of the business
  3. Obtaining relevant, accurate and timely information about how the buying is operated and activities of the competitors
  4. Profile of customers
  5. Profile of competitors
  6. Effective management ability and managerial competence
  7. Be current and flow with the trend of changes with business
  8. Always be concerned about customers satisfaction, know their taste/preferences
  9. Be innovative and introduce new pattern of doing the same thing
  10. Sell at relatively reduced price for higher turnover.

PROFIT PLANNING

Profit planning refers to the activities of enhancing business total earning-gross earnings and net earnings to achieve profit objective of the firm.

One major factor that limits organizations profit is scarcity of resources. This called for efficient use of available scarce resources which inevitably places emphasis on the planning function of management.

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In order to achieve business growth especially in terms of increased earnings, there must be proper planning. That is why there’s something called budgeting.

BUDGET

A budget has been defined in several ways by different scholars. It has been defined as a plan quantified in monetary terms, prepared and approved prior to a defined time, usually showing planned income to be generated or expenditure to be measured during that period and the capital to be employed to attain a given objective.

It follows therefore that if a business must achieve its continual growth in terms of increase in profit or earnings, it must inevitable be involved in planning/budgeting.

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TYPES OF BUDGET

The following are types of budget that a business organization could prepare to achieve business growth:

  1. Production budget
  2. Sales budget
  3. Cash budget
  4. Purchases budget
  5. Direct labour budget
  6. Selling/administration and other expenses budget
  7. Capital expenditure budget
  8. Research and development budget
  9. Master budget

USES OF BUDGET

The following are benefits drivable from budget:

  • It provides clear guidelines for managers and supervisors and is the major way in which organizations objectives are translated into action.
  • The budgetary process is an important method of communication and co-ordination both vertically and horizontally.
  • The control of current activities is facilitated by the regular, systematic monitoring and reportage of activities.
  • The preparation of budget makes possible better cash and working capital management.

ACCOUNTING AND BUSINESS GROWTH FOR SMALL AND MEDIUM ENTERPRISES

For any business to grow, it must have proper accounting records and regular financial reporting system provides vital information for decision making among alternative uses of scarce resources. Every business enterprise (both small, medium or big) needs financial accounting information or knowing the past performance, planning, organising, directing, executing, controlling of various resources and for decision making in order to succeed and achieve its desired objectives.

Partial experience in the industry and empirical research have shown that the common attitude of an average entrepreneur in Nigeria towards maintaining books of accounts and preparation of financial statements from such books for decision making and taking action had always been to keep those records he cannot avoid and any other records that are extremely critical to his business.

The reason for this behaviour and misconception is because the so called accounting records, as far as an entrepreneur is concerned, do not necessarily bring in physical cash to the business. Therefore, an average entrepreneur hardly employ qualified accountants, who may be well remunerated, to keep proper full double entry accounting system.

Related: Importance & Challenges of Small and Medium Scale Enterprises (SMEs)

More often than not, what influences an entrepreneur’s decision to maintain an accounting record and the extent of such records is the need to fulfill government’s legal requirements in terms of rendering annual returns, payment of taxes, or satisfying potential providers of funds or lenders such as banks, partners or even fear of losing money due to fraud etc.

This informed the reason why varying degrees of incomplete records and single entry systems of accounting are common place and being maintained by entrepreneurs and other business organisations.

Ordinarily, many entrepreneurs may not be interested to keep accounting records because of the foregoing reasons. This is the reality of the situation and the challenge in which the process of proper records keeping and the role of providing accounting information has to contend with.

Accounting information is not only used internally but also externally. The internal users are principally the management and the reports are specifically designed to meet the particular internal needs of the management which become known when the reports are prepared monthly, quaterly or yearly as the case may be while external users report are more of yearly reports which are needed by current and potential investors, banks, Federal and State tax agencies and creditors.

The accounting information system touches every aspect of any organisation including SMEs. Its role is all-embracing and serves as pivot on which other business activities revolve. In view of the ever increasing need for information that is relevant, objective and timely for decision making, the entrepreneur cannot be able to achieve the desired objectives of the business without the use of accounting information.

CONCLUSION

It is very clear that business growth does not just occur. It requires proper and deliberate planning of trading and revenue items as well as cost minimization.

Business grows with profit therefore, managers are encouraged to prudently plan their revenue and expenditure items to achieve profit objective.

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