Factors Affecting the Growth of Small Businesses

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There’s no doubt that one of the main objectives of any entrepreneur is to have their enterprise grow and expand. To achieve this, it is very important to understand the factors that contribute to growth. There is a general consensus that growth in enterprises is a complex process, which is neither linearly continuous nor dependent upon only a limited number of factors.

 

Some of the key factors determining the growth of enterprises are the:

  • Availability of financial, human, and social resources.
  • Technical and management skills that can adapt to and cope with a changing environment.
  • Potential to develop staff.
  • Creativity and opportunity recognition.

 

It is possible to define two types of factors which influence business growth:

  1. Characteristics such as behaviour, personality, attitude; their capabilities, including education and training that create higher expectations in some industry sectors; and their social capital which influences access to resources. You can also include management experience, family history, functional skills and relevant business sector knowledge. Although none of these can be said to give a universal success recipe.
  2. The business itself in terms of its structure and goals and the performance of its management, in particular their ability to make rational decisions about its operation.

 

Apart from these two categories, some external factors also have an effect on business growth. These are the cultural, political and economic conditions of a country or region.

The triggers for enterprise growth are found along a continuum from the attributes possessed by individuals to complex interrelationships among often changing cultural, political and economic conditions at national, regional and local levels.

Location is another factor. Variation in size, scope and buoyancy of demand in local markets is likely to affect growth opportunities. On the supply side, variation in the cost and availability of labour, premises and services is also influential. Nevertheless, owner-managed businesses are often adaptable, employing different strategies to deal with these local variables so that their impact is minimised.

Just having a growth orientation does not guarantee growth, rather that the owner should be committed to expansion. A business set up to exploit an identified market opportunity would be expected to have stronger growth orientation than one set up as a result of ‘push’ factors such as a lack of alternative opportunities. In a nutshell, it is important to identify the factors most relevant to the business and then exploit them to expand and grow the enterprise.

 

Many thanks to Dr Muhammad Azam Roomi, Senior Lecturer in Entrepreneurship and Business Growth, Cranfield School of Management for this blog content.

 

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