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Business Growth – 10 Tips On How To Grow Sustainably

Continuous business development is essential to the financial well-being of a business. Its absence can seriously damage a business or even lead to bankruptcy. The following tips can be used as a guide for sustainable business growth:

  1. Understand the financial health of your business (e.g. financial statements, rate and sustainable growth rate).
  2. Build a sustainable business growth model and innovate it. A basic formula for calculating the constant growth rate (developed by Hewlett-Packard), which is very helpful, is:
    • SGR = ROE * p
    • where:
    • SGR = constant growth rate
    • r = retention rate (1 – dividend payout ratio)
    • ROE = net profit margin * asset turnover * equity multiple
  3. Budget based on growth achieved based on sustainable growth formula. Stay within this budget.
  4. Just avoid selling for the sake of selling. It is important to keep the gross profit margins as close to the budgeted figures as possible. A lower rate of profit reduces the rate of growth achieved.
  5. Avoid impulsive business decisions and focus on the core business. Taking money out of a good business and investing it in another ill-conceived venture is usually suicidal for the main business.
  6. Improve employee business awareness and improve internal systems to keep up with higher sales.
  7. Improve the rate of continuous growth with high profit and optimal utilization.
  8. According to the Pareto principle (80-20 rule) more or less products, suppliers, customers, regions, etc. Eliminate those that are not really beneficial or waste too much time and energy.
  9. Invest as much money as possible in the business (in the growth phase).
  10. Just borrow more money (above the pre-determined best loan rate) or sell as a last resort. The first problem increases the risk of bankruptcy of a company and the second reduces the profitability of existing shareholders in the business.

Copyright © 2008 by Wim Venter. ALL RIGHTS RESERVED.

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