Site icon Connectnigeria Articles

Understanding Business Growth Curve

Grace Christos
Businesses are unpredictable, which is the reason for business owners to have a strategy and vision and actionable plans, though past actions can provide a fair idea of the results and gaps, but are highly unlikely to deliver the same. So businesses use growth curves to track or predict many factors, including future sales and the analysis of growth curves plays an essential role in determining the future success of products, markets, and societies, both at the micro and macro levels.
Read more about Business Growth
BUSINESS GROWTH CURVE A growth curve has different applications in different fields of study, but it is extensively used in finance, most especially by businesses in order to create a mathematical model to analyze the growth in sales or profits, and also to predict future sales. You need to understand that the shape of a growth curve can make a big difference when a business determines whether to launch a new product or enter a new market, and that slow growth markets are less likely to be appealing because there is less room for profit.  Growth curves can be typically classified into two types:   An Exponential growth curve Exponential growth, also referred to as unrestricted growth, usually occurs in an ideal environment with unlimited resources and the growth is slow in the beginning, but increases rapidly with the passage of time. Exponential growth curves are most commonly used to denote population growth, growth of wealth and investments, and business growth.   Owing to large size and lack of agility, large businesses are unable to achieve exponential growth, but the case is opposite for start-up businesses because due to their small size and agility, they can achieve exponential growth. This exponential growth potential in the start-ups led to a new class of investing which is known as ‘Venture Investing’.  Also Exponential growth is generally positive, and exponential growth markets do provide opportunities for fast growth and handsome profits, but they also typically lure in a lot of competitors. In order to achieve exponential growth, businesses, mostly start-ups, intentionally and constantly work towards it by innovations, allocating resources to marketing and sales, raising funds and involvement of mentors and industry experts.
Sign up to the Connect Nigeria Daily Newsletter
A Logistic growth curve  Logistic growth, or restricted growth, occurs when the numbers begin to approach a finite carrying capacity and the growth is typically fast in the initial stage, but drastically slows down with the passage of time. Also large businesses struggle to maintain linear growth.  Logistic growth patterns are most prominent in graphical representations of increase in literary skills or language proficiency, weight loss regimes and musical skills. Logistic growth also occurs in populations that begin to experience environmental resistance, while approaching the carrying capacity. A good example of logistic growth in business can be when the shape of the growth curve essentially determines the direction that the company will be required to take in the market. For many businesses, logistic growth markets are not the most desirable places for product launches, because such saturated markets do not leave much room for profits.    It is important to note that when business owners tend to forecast current trends into financial projections without considering what got them here will not take them there and that exponential growth is not for perpetuity, sooner or later the J curve which is the exponential growth tends to turn into S curve, which is the logistic growth and this process is known as flattering of the curve. From an investor’s perspective, one must identify the market forces and timelines that flatten the curve, and during the period that the curve flattens with growth, marketing expenses, resource deployment and best of the professionals can help maintain the flattened growth or push towards linear growth, but rarely do they succeed in achieving J curve.  And at this point, what is required is not Improvement but Innovation, because as the growth curve flattens and every time it flattens, increasing marketing expenses, offering discounts or changing leadership team does not improve the condition, rather deteriorate.  So try to think, innovate, adopt, implement and keep repeating this process. Featured image: Ninjodo
Got something you want to read about on our platform? Contact us: editor@connectnigeria.com  
Exit mobile version