The Basic Concept Of Business Growth

Business growth means expanding firm's products and services or expanding its target markets, or some combination of each. Any increase in the volume of activities of enterprises is a clear indication of growth.
Business grow for a number of reasons including to take advantage of a gap in the market, to gain a competitive advantage over rivals, and to win increased market share.


Usually ventures start small because of limited knowledge of the market, shortage of capital and lack of skilled employees etc. It is expected that as the entrepreneur gains more skills, knowledge and acquire additional resources, the volume of activities of the business will expand. An entrepreneur may also capitalize on changes in the environment to expand his operations in order to exploit new opportunities.


Theorists have shown that behavioral traits are significant influence to entrepreneurs desire to grow his business. Some people inherently derive satisfaction from being excellent in what they do;  they tend to have insatiable desire to grow and positively affect the world around them. Other people tend to comfortable with average results while others are "easy come easy go".


In explaining the pattern of business growth, many theories rely on "the life-cycle approach. This approach posits that just as humans pass through stages of physiological and psychological development from infancy to adulthood, businesses also evolve in predictable ways and encounter similar problems in their growth" (Bhide, 2000). It is proposed that businesses pass through infancy, growth, maturity and then decline or even close shop. Some scholars suggest more or fewer stages of development.


 However, there is no consensus on the number of stages, nor on how they are related. moreover, the proposition that all businesses follow the set sequence is not at all supported by the empirical evidence. The main issue is that companies are started at one point and they need to be nurtured and managed to grow bigger and bigger. There are companies around the world that survive decades or centuries. The question is why do some businesses survive and grow while others do not.

Reasons For Business Growth

Researchers have shown that more than half of all businesses fail in less than two years of commencement. Also, a large number of those businesses that survive the first two years hardly grow. It is only few businesses that survive, grow, regenerate and even create other businesses. Conventionally, people ascribe businesses success or failures to fate/chance or certain environmental conditions including family background. Even though one could not entirely rule out the influence of changes in the environmental factors, the entrepreneur 's positive attitude, discipline, skills, competences , resilience and experience are real factors determining the transition of an enterprise form state up to a fully grow or diversifies venture.


The question often asked is what motivates people commit to starting and growing their businesses. Usually, entrepreneurs tend to make critical investments, take acceptable risks and learn consistently because of their desire to make money and enjoy all the rights and privileges that come along with wealth. Other reasons include improved social status and well being, greater opportunity for philanthropy and community services, and gaining control over their own destiny. Employees attribute increase in income/benefits and advancement with businesses that grow. Government tends to favor business growth because it lessens unemployment and social tension in addition to raising more revenue from taxes. Thus, it is in the best interest of business owners and other stakeholders in the society for businesses to grow and flourish because growth tends to create social and economic value for all.


On general note, start ups and small businesses generate employments opportunities. ILO (2007) estimated that about 70% of the people in sub-Saharan Africa rely on small and informal establishment for their livelihood. For example I'm South Africa, the share of employment provided by SMEs sector is estimated at 60% and generated about 40% output (Lukacs, 2005). In Botswana, small business contributed between 30-45% to the nations GDP and accounted for more than 60% of wage employment. Thus, any increase in the activities of small enterprises will lead to corresponding increase in employment.


As employments are generated, the increase productivity raises the level of wealth creation is a given economic environment. This is why the productiveness of an economy is related to increasing income and improving standards of living. Businesses combine human and material resources to create value. So, as activities of enterprises increase due to increase in labour productivity and efficient use of resources, all things being equal lead to high wages for individual worker, more profit for the company and rise in GDP for the nation. When productivity is higher, cost of production tends to be lower. With lower cost of production, citizens obtain products cheaper and these, in turn, increase living standards.


Types of Business Growth
Two main types of business growth
Internal growth
External growth

Internal growth : internal growth is typically a steady process of expansion from within the firm. The owners of the business contribute more capital, or plough back profits into the business to acquire new assets, employ more staff, build additional plant or deploy new technology. The main advantage of this approach is that the business is able to leverage its assets and experience over time. The main disadvantage is that it takes time, and rivals may be expanding and gaining competitive advantage as well. NASCO Nigeria plc used this approach by expanding into the production of detergents and carpets. Thus, through hard work and careful planning owners can grow their businesses successfully.


External growth : External growth can be carried out by seeking external finance, or by merger and acquisition. These approaches tend to rely on bringing external resources into the business in order to fund expansion. In this case, there is the possibility of changes in the ownership structure of the firm or changes in its gearing position.