Factors Affecting the Growth of Small Businesses

By Dr Muhammad Azam Roomi



It’s safe to say that a key objective for any entrepreneur is to ensure their enterprise grows profitably. In order to realise this, it’s crucial to really understand the drivers which contribute to growth.

There is a general consensus that growth within enterprises is a complex process, this is not dependant on only a few factors, nor is it linearly continuous.

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

Four factors that influence business growth

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

1. Personal and behavioural traits

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

2. Business structure and management

How the business is structured, its overarching objectives and the performance of its management team, in particular their ability to make rational operational decisions, will have a strong bearing on the successful growth of the business.

3. External factors

Whilst the two considerations above can be managed to an extent, external factors over which you have almost no control are also going to have an effect on business growth. These factors include the economic, political and cultural conditions of the country or region in which your company operates. The triggers for enterprise growth depend upon the personal attributes of individuals and their complex interrelationships with 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 premises, labour and services are also influential. Nevertheless, owner-managed businesses are often agile, with the ability to apply different strategies to deal with these local variables so that their impact is minimised.

Just having a growth mind-set does not guarantee business 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 short, it is important to identify the factors most relevant to the business and then exploit them to expand and grow the enterprise.

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