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## Business Growth – 10 Tips On How To Grow Sustainably

Sustainable business growth is essential to the financial well-being of a business. Its absence can seriously damage a business or even cause it to go bankrupt. The following tips can be used as a guide for sustainable business growth:

- Understand the financial health of your business (eg financial statements, ratio and sustainable growth rate).
- Build a sustainable business growth model and keep it up to date. The basic formula for calculating the sustainable growth rate (developed by Hewlett-Packard), which is very useful, is:
**SGR = ROE*r**- where:
- SGR = sustainable growth rate
- r = retention ratio (1 – dividend payout ratio)
- ROE = net income * return on assets * multiple of equity

- Budget for affordable growth based on the sustainable growth formula. Keep within this budget.
- Avoid selling just for the sake of selling. It is important to keep the revenue margins as close as possible to the budgeted figures. Lower income margins reduce the rate of growth that can be achieved.
- Avoid impulsive business decisions and stay focused on core business. Taking money out of a good business and investing it in another ill-conceived business is often suicidal to the core business.
- Improve the business acumen of employees and improve internal processes to stay up-to-date and top sales.
- Optimizing sustainable growth rate with higher profitability and better asset utilization.
- Analyze products, suppliers, customers, regions, etc. more or less according to the Pareto principle (the 80-20 rule). Get rid of those that are not really profitable or that waste a lot of time and energy.
- Return as much money as you can to the business (at the growth stage).
- Only borrow more money (above your stated credit limit) or sell equity as a last resort. The first factor increases the risk of bankruptcy of the company and the second reduces the current shareholders’ equity in the business.

Copyright © 2008 by **Wim Venter****. ALL RIGHTS RESERVED.**

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