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 profitably. 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.

Whilst there are numerous variables that can influence the growth potential of a business, in our experience there are certain areas that business leaders need to pay particular attention to, such as the availability of financial, human, and social resources. Having technical and management skills that can adapt to and cope with a changing environment are also fundamental, as is the potential to train and develop staff. And any enterprise cannot survive without a dash of creativity and opportunity recognition.

Four key factors that influence business growth

Here are the four key areas that we at Cranfield recommend any business owner to pay particular attention to when looking to grow their business.

1. Behavioural and personal traits

A business leader's characteristics such as behaviour, personality and attitude can certainly have an impact of the growth of the business. Furthermore, their capabilities, including education and training create higher expectations in some industry sectors, whilst their social capital influences access to resources. Management experience, family history, functional skills and relevant business sector knowledge are also ingredients that will influence the recipe for success.

2. Business structure and management

How the business is structured, its goals and the performance of its management team, in particular their ability to make rational decisions about its operation, will highly impact the successful development of the business.

3. External factors

Whilst the above two considerations can be managed to an extent, external factors over which we have virtually no control are also going to have an effect on the business' growth. Such factors are the cultural, political and economic conditions of the country or region in which the company operates. 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.

4. Location

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 are 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. 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.