Organic growth: the basics

If you feel you're at a comfortable level with the business but want to take things further, increase your turnover and make more profit, it's a good idea to look at different ways into expansion. Having a clear idea of how you want to grow gives you a much better chance of expanding successfully and staying in control. This guide looks at organic growth, one of the most common and straight-forward types of expansion:

  • What is organic growth?
  • Advantages
  • Disadvantages
  • How to grow organically

What is organic growth?

Organic growth means expanding your business and increasing turnover by carrying on doing what you're doing, rather than through acquisitions (buying other businesses) or through moving into new markets. You might move into a new geographic region or use a new sales channel, but you're still using your original business model. You don't force growth with outside investment and the rate of growth is more natural - hence the name organic. You're just trying to increase sales.

  • Expanding naturally rather than through acquisitions or new markets
  • You use original business model
  • Growth rate is natural, not forced

Advantages

Organic growth is typically much safer than rapid growth or growth through mergers and acquisitions, because you're using a tried-and-tested business model. It gives you the opportunity to test your model thoroughly before moving onto another one. It's also easier on your finances. You can achieve growth organically by reinvesting profit back into the business, so avoiding the need for outside investment - and the pressure from shareholders that often comes with it.

  • Safer as using tried-and-tested model
  • Easier on finances and avoids need for outside investment

Disadvantages

Organic growth often takes longer than more aggressive strategies for growth, so if you're looking to expand very rapidly it may not be for you. You may also find it limiting if you're keen to try out lots of different business models and new ideas. Some business-owners also thrive on having outside investment and the pressure as well as the guidance that can come with it.

  • Usually takes longer
  • Can be limiting
  • Some business-owners prefer having outside investment

How to grow organically

You can achieve organic growth by selling your products in new geographic areas, or using new sales channels, such as through a wholesaler or website. Try to ensure that new channels or areas create more sales, rather than simply shifting existing customers from one channel to another. You can also look at selling to new customers, and selling more product or new products to existing customers.

  • Selling in new areas or through new channels
  • Selling to new customers or selling more to existing customers

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