Organic growth is the form of growth where a business grows using the funds it generates. In other words, the business expansion drive is self-funded by reinvesting previous profits into the business to fund future sales and profit increases.
No external funds are used in an organic growth model. The amount of organic growth that a business can achieve is highly dependent on sales and past reserved profit levels.
Inorganic growth is where the business joins with another in order to grow. This combination can be through takeovers, mergers, and acquisitions.
So which is the best growth Model?
There is no one size fits all formula for the right business growth model. It all depends on your business, your industry, your own personal needs, the opportunities available to you with respect to mergers, acquisition or takeovers, and so forth.
What suits one business may not necessarily be right for another. Hence ultimately it all depends on what you want to do with your business.
Some may choose to combine both models of growth in their businesses. The choice as to how you grow your business is entirely up to you.
However, Organic growth has a few advantages that you may want to consider. Organic growth has a better chance of success because you will have more knowledge and experience of your own business.
You will know the ins and outs of the business and so you can run that expansion effort much more competently. More so, growing your business organically allows your business to maintain undiluted organizational culture.
Also, organic growth gives you the opportunity to earn a lot of money by selling off the business later when you have grown it if you choose to do so.
Your business vision is one of the most important elements of any growth model that any business can implement. Your vision tells you where your business needs to be, tomorrow, next year, in 3-5 years, and so on.
Therefore there can be no growth that is independent of your vision. It just cannot happen. Your vision regulates everything about your growth. Without vision, there is always the risk of growing too fast or too slow.
Without vision, your growth is uncontrollable. Vision essentially gives you a target point to pursue.
So how does your vision regulate and control your business growth?
Firstly vision locks your business within a specified time framework. Your growth decisions are based on what needs to have been achieved by a specific date.
If for instance, say your business has the vision to reach a turnover of $1,000,000 in 6 years. You can then plan your growth systematically to build up to that target. You could break that overall Vision as follows;
Year 1 – $50,000
Year 2 – $100,000
Year 3 – $250,000
Year 4 – $350,000
Year 5 – $650,000
Year 6 – $1,000,000
Now if you have that sort of information when you start your business, you can be able to plan your growth much more effectively. Because each target is time-restricted, you can regulate your growth to speed it up if it is too slow or slow it down if you think it is going unsustainably too fast.
Hence given that business vision is such a crucial element of growth, you cannot succeed without it.
Thus if you have not yet set out a vision for your business, then I suggest you put your growth drive on hold and work on your vision first. This is very important so pay serious attention to it.
Linking your growth plan to your vision also helps you to plan your business operations. The fact that you know in year one that, in year two you will need to reach a certain turnover target means you can start putting in place the structures that will help your business to meet its targets.
You can know exactly when to implement decisions, for example, when you will need to increase staff or when you will need to buy more equipment. It`s all down to having a good, clear vision.
Therefore Business vision and growth cannot be separated.