“If you’re not growing, you’re dying.” – Tony Robbins
A business, much like an individual requires growth to survive. There is no such thing as stagnation or staying in place.
If you stay the same, the world is progressing, and therefore you are moving backwards.
As a business, growth is a very common objective, yet how to grow your business is not always clear cut.
Growth can take on a lot of different meanings. Is it improvement? Is it increasing revenue? Hiring more employees?
At Kahuna Accounting, the hundreds of businesses we work with each want to grow. But growth looks different for each one of them.
Growth isn’t always a good thing for a business, as it can lead to additional problems you hadn’t yet considered. Your financial information is where to look to find out the difference between good growth and bad growth.
Financial insight can lead you to sustainable growth driving maximum profitability. This is the growth we are looking for.
But how do you find this in your financials? How do you analyze your growth?
Let’s turn back to Tony Robbins for another quote:
“Successful people ask better questions, and as a result, they get better answers.”
When you look at financial statements as an entrepreneur, sometimes the story the numbers tell you isn’t very clear cut. In fact, it can be a foreign language. Imagine watching a movie in Portuguese without subtitles. You might be able to make out a few things here and there and understand the general plot, but any important details will be lost.
Like Tony Robbins said, maybe the key isn’t to just look for information, but to ask better questions. If you take your financial statements and ask hard questions, you’ll mine out gold and find powerful, insightful answers.
In the book, “The Secret to Business Wealth Mastery,” authors Mick Holly and Andrew Gien help business owners see the story contained within their financial statements.
When turning to the subject of growth, they recommend several questions to help dig some better answers out of the information provided.
“What is our growth rate?”
Do you know what your business’ growth rate is? This involves comparing one period of time to another in the income statement. How did sales perform this month versus last month? This year versus last year? This quarter versus last quarter?
“Is it in line with our plan?”
Every business needs to have goals in order to achieve them. When you see the trajectory – is that what you expected? Is that what you were planning on? What can you expect to see going forward?
“Was the growth created through volume improvements or price increases?”
Sometimes growth is not just about more sales. If you can sell a higher priced item or increase your rates, you may see a revenue spike without more sales.
“How consistent is our growth?”
When you compare time periods, is it consistent, or do you have major ups and downs? If it’s consistent, you have more predictability and can experiment with ways to grow. If it’s volatile, you need to get to the bottom of what causes the spikes or the valleys to avoid those dips in sales.
“Where did the growth come from?”
When we see growth, it’s fun to celebrate the momentum, but the real gold is in finding why it happened and where it came from, because maybe you can repeat it or build on it.
“Can the current growth rate be improved or maintained for the future?”
When you see where the growth is coming from, it’s important to dig in and find out if you can do it again the next period.
Or if things dipped, take a look back at what has worked before and what didn’t work now.
One way to find this is by observing your profit and loss statement and considering the sources of revenue and expenses related to growth. For an in-depth look at the Profit and Loss statement, see this video.
“Is the growth permanent or based on timing?”
Some businesses are seasonal, and some are consistent over time. Sometimes we may try a campaign with a discount that gets a great result, but the next time it won’t work.
Take a look at your growth and understand if this is something you can repeat again and again or if it’s more of a one-time thing.
You should know your business and your customers better than anyone. If you aren’t sure on some of these questions, maybe it’s a good time to talk to some of your clients. Ask them how they found you and why they decided to sign up. You can find key insight by maintaining those relationships.
Do we have good evidence to support an investment in continued growth?
Ultimately growth comes down to an investment. You are investing in marketing or sales or personnel to drive growth.
Growth also requires an investment from your team to give your customers and clients maximum value for what they are paying you. Sales without client success will not be good for your business. When you grow, it’s important to count the costs. What stress did this put on the business? At what cost?
If it’s profitable and repeatable, that’s great news. If you had good growth but also churned a lot of customers and stressed out your team, you still have a few questions to ask. What went well with the marketing? Where was the disconnect in the delivery or expectations?
Many businesses are simply searching for more growth, but there are a ton of layers to growth. We need growth, but we need the right growth.
Asking the right questions can lead us to a goldmine of information and will ultimately drive our business toward our goals.
Because as Holly and Gien say in their book:
“Good consistent growth is the ultimate measure of competitive advantage.”
What story is your growth telling? Are you looking for more insight with your financials versus mere information? Head to this page and see how we at Kahuna help our clients achieve understand their growth so they can maximize their victories.