What is Organic Growth to a Business?
Organic growth is defined as the process in which a business expands through its own operations, using resources internally available. In other words, organic growth occurs using resources that are supplied by the business itself, instead of having to borrow outside resources.
Indications of a business experiencing organic growth include a marked rise in output, higher production speeds, and overall better efficiency. Additional indications of organic growth include revenue and cash flow improvements.
Although organic growth strategies may take time to develop, they are generally recognized as more beneficial long term in comparison to other growth strategy types. One significant reason to achieve organic growth is to avoid taking on substantial debts and accomplish self-sufficiency.
Organic vs. Inorganic Growth & 5 Strategies to Manage
There is a significant difference between organic and inorganic growth strategies. Inorganic growth is defined as any growth that is achieved through the acquisition of other businesses.
There are various pros and cons for business owners to consider within these 2 growth strategies. A pro of organic growth strategies is that there is most likely a strong and successful business plan in place.
A con of organic growth is that by only using resources internally available, it can take time to see any substantial growth. Additionally, organic growth organizations may struggle to respond appropriately to changes, such as preferences of new customers or market condition variations.
A pro of inorganic growth is that acquisitions can quickly address changing customer preferences or market conditions. For example, if customers are interested in a new product that a company cannot produce itself, then the company can acquire another business that does produce that product.
Inorganic growth is widely recognized as the fastest growth strategy type and can be immensely helpful in maintaining both a competitive edge and market share portion.
A significant con of inorganic growth is the large risks it carries, ranging from new customers or new markets not engaging with new products offered to an incompatibility between merged company cultures.
A healthy combination of organic and inorganic growth strategies can be massively beneficial for a company in both the long term and short term future. 5 strategies to manage business growth include-
Businesses should make sure to take time to properly research their target markets and clients. Research is especially important to undertake whenever a company is entering new markets or working with a customer base that is not familiar.
Proper research helps businesses to understand what new customers want and expect. Results of research conducted can be applied to a range of business activities, from new product development to social media customer service interactions.
Studies show that professional service firms that consistently perform research regarding their target audience experience business growth at a 200% more rapid rate. Additionally, these firms are on average more profitable than firms that do not perform adequate and consistent research.
A common mistake that businesses make occurs when it tries to expand too quickly. Unfortunately, overly aggressive business growth strategies can actually result in significant financial losses or even failure.
Alternatively, high growth firms are 75% more likely to have a niche that is well defined and concentrated on. A concentration on a niche market benefits businesses in their marketing strategy efforts and increases market share control capabilities.
A differentiator is defined as a business benefit or feature that distinguishes it from competitors. Differentiation allows a business to stand out, which is especially important in a crowded or overly competitive marketplace.
Differentiators should be both provable and relevant in order to be effective. Noneffective differentiators are those communicated to new customers or an existing customer base which does not actually result in value delivered to the client themselves.
Note-: Studies have shown that differentiation is a top marketing strategy priority for high growth firms.
Just as a balance between inorganic growth and organic growth strategies are recommended, a balance between marketing strategy types is also widely advised.
Utilizing both traditional and digital marketing strategies can result in highly effective marketing initiatives.
Another crucial factor to drive organic growth rates includes consistently tracking marketing strategy progress and success. In fact, high growth firms closely monitor their marketing strategy efforts at a 33% higher rate.
Studies show that customers value expertise highly, at almost as high of a rate as they value the presence of talented staff. Although expertise can be considered a differentiator as it is unique to a specific company, in order to drive growth it must be visible.
Examples of visible expertise include social media customer service conversations and search engine optimization.
- High growth companies generally utilize a mixture of inorganic and organic growth strategies.
- Strategies to grow organically and inorganically range from researching to differentiation.