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PKF Australia

Accountants and Business Advisers

Growing your Business: Part 1 - Organic Growth

Growing your Business: Part 1 - Organic Growth

Nothing ever grows in the comfort zone.

 

Our article “The Importance of Business Strategy” demonstrated the benefits of identifying and planning a strategy regardless of the size or the lifecycle stage of a business.

Growing a business requires a strategy, a pathway to implement, achieve and track target growth. The two most common methods via which business growth may be achieved are discussed below:

Figure 1: PKF Avenues to Business Growth

graph

Organic growth focuses on the ability of a business to improve internal operations or processes in order to grow performance.

This article aims to provide more detail regarding the specific avenues to organic or internally driven growth. Each one outlined in Figure 1 is considered in greater detail below.

 

Maximising Earnings

Business value is a function of future economic benefits in the form of either earnings or cash flows.

The three key methods identified to maximise earnings are summarised in the table below:

Table 1: PKF Avenues to Maximising Earnings

No. Method Focus
1. Growing Revenues Strategies should be focused around expanding existing revenue streams and the introduction of additional complimentary services and/or products.
2. Improving Margins Strategies should be focused around improving pricing power to maximise returns, expanding revenue streams and the introduction of added value services or complimentary products for the same or reduced direct costs.
3. Reducing Costs Strategies should be focused around reducing operating cost and maximising available synergies.

 

Capturing Market Share

A growing business must either introduce new markets or maintain and capture a larger share of the existing market. The larger the market of customers and users, the greater the opportunity to increase market share.

The four key elements identified as being vital to capturing market share are summarised in the table below:

Table 2: PKF elements to assist in Capturing Market Share

No. Elements Focus
1. Competitive Advantage Strategies should be focused around the continuous innovation and improvement of the distinguishable characteristics of products and services offered.
2. Brand Awareness Strategies should be focused around target marketing and continuous improvement of the visibility of products or services offered.
3. Entering New Geographic Markets Strategies should be focused around expanding the business presence (local, national or regional locations) to be closer to target markets and customers.
4. Diversification Strategies should be focused around expanding product and service lines offered to either complement the existing supply chain or to hedge against product concentration risks.

 

Quality of Management

A strategic plan for a business is implemented and overseen by management. Management control day to day operations of the business through key decision making and the future of the business through planning and monitoring.

The three key considerations identified by PKF that influence the quality of management are summarised below:

Table 3: PKF factors that influence Management Quality

No. Factors Impact
1. Range of Skills Different levels of management should be able to complement each other through a diverse range of skills, knowledge and networks.
2. Mentors Providing management with mentors, for example, a board or a committee, will allow management to draw upon external knowledge, views and opinions in decision making.
3. Continued Development Attending industry specific conferences and/or exhibitions provides management with insight into upcoming trends, new products and/or services and market specific conditions. This also provides management with the opportunity to meet competitors or other key players within the supply chain.

 

An effective business strategy based on organic growth should clearly identify strategies to maximise value, increase market share and continual develop the quality of management.

If you need help identifying, planning and implementing a business strategy, contact either Steven Perri or Timothy Bow of our Melbourne office or alternatively any of our corporate finance specialists around the country.

 

 


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