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The 5 Best Indicators of Business Growth


Overview

Published: 07/18/2018 by Home Pros Guide

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Small businesses don’t necessarily grow all at once. Business growth is evaluated using external factors like customer demand and sales trends in addition to financial records. Determining how much your business is growing at an annual or quarterly rate will improve the accuracy of your financial projections, helping you set goals for future growth, and better allocate resources and spending to areas that need more attention.

Here are five of the best indicators for business growth:

Demand

Your growth potential depends in large part on how much demand there is for your business, whether that’s a service, product, or experience. Assessing your business’s demand is crucial if you’re thinking about expanding your business, or making a hiring plan.

Profit and Losses

Profit is your net income after essential expenses, like payroll, equipment, and inventory; and losses are the costs that exceed revenue. Obviously, a healthy business needs to have more profits than losses.

Revenue

Calculating your annual revenue growth rate is a good next step once you’ve analyzed your profit and losses. If you’ve been in business for fewer than three years, or are a venture-backed company that hasn’t become profitable yet, cash might be tight or business might vary month to month. Revenue can help indicate growth, even if your profits aren’t increasing right now.

Sales

Your sales team is the frontline of your business, and you have insights into the trends and changes from month to month that will impact revenue. Especially for small business owners hoping to increase sales, it’s important to consistently report on sales performance.

When a sales team has more leads than they can call,  or are working exclusively on inbound leads, there’s a good chance the wider market is expanding, and with it, the potential for your business. And if your team is closing more deals than your product and account managers can handle, that might indicate growth potential for your business specifically.

Market Share

A healthy competitive market will actually help your business grow, so you want to see activity in the space outside of your own business. In the case of small businesses, this indicates demand in the market for the good or service you provide.

There are a few different indicators of business growth that will provide a composite view of how your company is doing, and where it’s projected to go.