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Why Numbers Are Not Always the Best Way to Measure Growth
Written by Marissa B. on May 19th, 2020

Say! Yes Enterprises works hard to educate business owners and investors about valuations.

When it comes to growth, most entrepreneurs and investors think about key numbers like sales, revenue, and profits. To show that a business is growing, the finances need to prove that the business is making more money. Money is one of the core goals in any business endeavor, but numbers are not always the best way to measure growth.

When business owners focus on non-numerical aspects of growth, a business is better equipped to handle the kind of growth that results in more money. Like a poorly executed graph, numbers can present a skewed picture. What can business owners do to make sure that the number they watch gives an accurate portrayal of their business? Consider a cautionary account:

Why Bigger Isn’t Always Better

Many people see growth in terms of exploding sales goals over the next 90 days or doubling a business in 60 days, but there is a flaw in this reasoning. Growth can happen on a sudden and even exponential basis, but is that always positive?

Silly Bandz are a trend that lead to “flash in the pan” growth. Overnight, middle schoolers went into a frenzy for the shaped bracelets. Stores could not keep Silly Banz in stock, and they became so popular that schools banned the tradeable item.

At the height of its popularity, Silly Bandz seemed unstoppable, but there was no real explanation for the extreme demand. Over time, that frenzied demand cooled off. Silly Bandz is still in operation, but the company is not still a must-have item that is selling out of stores.

Growth that is not understood is impossible to recreate. Sudden growth generates more revenue, but it also generates more expenses. A business needs a sturdy internal infrastructure to deliver when there is more demand.

For Silly Bandz, less than adequate supply resulted in more demand. That concept does not always work. A homeowner with a broken air conditioner in the middle of summer will not wait around on a favored company that does not have an open appointment for weeks. If a restaurant has a line out the door, some customers will go elsewhere. Growth that is not prepared for can result in loss, even if revenue increases.

There is no shame in riding out the high that can result from the waves of supply and demand. Nevertheless, planned sustainable growth is better in the long-term. When there is a clear reason for growth, investors are more comfortable investing in a business.

The Truth About Numbers

Numbers are an easy way to measure growth, but they do not always give an accurate portrayal of a business. The exact statistics that are key indicators of growth also vary from industry to industry. A figure that is very significant in one field may not be as meaningful in another.

Numbers can also skew. For a new business or a business that is recovering from a crisis, any progress will look like exponential growth. For example, a business that increases from one sale on its first day to ten sales on its second day has experienced 10X growth, but that growth may not be enough to keep the company solvent.

Growth is not about big numbers and huge milestones. Slow and steady wins the race. Growth comes from the consistent, less than glamorous actions taken every day to build a stable business with upward momentum.

“Revenue is vanity. Profit is sanity, and cash is king,” goes the adage.

Do not get caught up in numbers and increases. Especially at the beginning of a business, reasonableness is necessary when it comes to growth. Anyone can smash a goal, but a business needs the five pillars (link to article) as a strong foundation. Marketing should be a strong focus at the start of any business.

Since a business owner makes key decisions, growth for a business is often preceded by growth within the entrepreneur running it.

Delegation—The First Step Towards Growth

Delegation is the first and most significant marker of growth in an entrepreneur. In the beginning stages of business, many entrepreneurs wear too many hats. They feel the need to be the salesmen, marketers, craftsmen, and bookkeepers all in one. In most cases, this is because of financial strain, and sometimes it’s because entrepreneurs don’t trust others. Regardless of the reasoning, this is inefficient and it stifles the growth of a business.

Albert Einstein is famous for saying that judging a fish by its ability to climb a tress is silly. The fish will always fail at climbing a tree, but a fish would excel at swimming. Many entrepreneurs who do not delegate are putting themselves in predicaments that are just as fruitless.

Each entrepreneur has unique skills, so focus on areas of brilliance and delegate other tasks. This is the first step towards building a business rather than a one-person operation that puts entrepreneurs on the fast track to burnout.

This step towards personal growth also contributes to business growth. Delegation may lead to hiring employees or hiring outside contractors. Either way, it requires consistent cash flow to pay people, which is a sign of stability. The delegation also frees up the business owner’s time to focus on their area of expertise that will help move the business forward faster. The entire business operates at peak efficiency when people who can do the best job at the quickest pace handle tasks.

When To Raise Prices

Raising prices is another step towards growth that an entrepreneur would do well to take. On the surface level, this raises the numbers that entail growth, namely profit and revenue. This also increases the worth of the company in the eyes of customers.

Consider this: Two otherwise similar pairs of sneakers have different prices. One costs $100 and the other costs $20. Which pair seems to be the better purchase? Despite the drastic difference in price, many customers would opt for the more expensive pair of shoes because the other pair is so inexpensive that it seems inferior.

Entrepreneurs often go through hoops to keep prices low for customers, but cheaper is not always better. As much as business owners often think it is true, customers are not apt to remember prices. Incremental increases over time will not cause a revolt among customers.

Business owners are in total control of the growth of their business. Growth goes beyond numbers and sales figures. This ongoing process always involves making the entrepreneur better at handling business. See our article on growth to learn the exact steps to fostering growth in a business.

A Final Note

“If an entrepreneur bases their business in certainty and confidence, I can see that in their team. If an entrepreneur always feels like the sky is falling and there is another fire to put out, that is going to trickle down to their team.” -- Christopher Wick

About Say Yes! Enterprises

Say Yes! Enterprises is an investment management company that acquires, builds, and sells companies that benefit shareholders, customers, team members and communities at large.
About Christopher Wick
Investor, 9X Award-Winning Entrepreneur, and 5X Best-Selling Author & Speaker

*Founder/Principal of businesses that have been featured by Huffington Post, ABC, NBC and Wall Street Select*

Christopher Wick is an award-winning entrepreneur who has built, bought and sold various companies relating to social media marketing, e-commerce, real estate, retail and investing.

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Say Yes! Enterprises is an investment management company that acquires, builds, and sells companies that benefit shareholders, customers, team members and communities at large.
Say Yes! Enterprises is an investment management company that acquires, builds, and sells companies that benefit shareholders, customers, team members and communities at large.
CONTACT 
Say Yes! Enterprises
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STE 100 
Austin, TX 78731
Copyright © 2020 Say Yes! Enterprises | All Rights Reserved. 
Copyright © 2020 Say Yes! Enterprises | All Rights Reserved. 
ABOUT 
ABOUT 
Say Yes! Enterprises is an investment management company that acquires, builds, and sells companies that benefit shareholders, customers, team members and communities at large.
Say Yes! Enterprises is an investment management company that acquires, builds, and sells companies that benefit shareholders, customers, team members and communities at large.
CONTACT 
CONTACT 
Say Yes! Enterprises
5900 Balcones Drive, STE 100, Austin, TX 78731
Say Yes! Enterprises
5900 Balcones Drive, STE 100, Austin, TX 78731
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