Factors and Indicators of Business Growth
Senior 1 · Entrepreneurship
Factors and Indicators of Business Growth
Lesson 1 of 5
25 min
In 1983 a 20-year-old called Sina Gérard started a small bakery at Nyirangarama, in Rulindo District, beside the main road north from Kigali. He had very little capital: a small sum of money and produce from his parents' farm. Travellers stopped to buy his doughnuts, which he named Urwibutso ("something to remember").
When the bakery made a profit, he reinvested it. In 1999 he bought juice-making equipment and began working with local fruit farmers; his Agashya juices became popular. He went on to add livestock, wine, biscuits, maize flour, mineral water and Akabanga chilli oil, now sold across Rwanda and abroad. According to Wikipedia, the business, Urwibutso Enterprises, has grown "from a small shop to multiple branches around the country", provides about 280 full-time and 600 part-time jobs, and works with about 3,000 farming families.
Think about it: in how many different ways has this business grown since 1983?
Definition
Business growth: an increase in the size or activity of a business over time: more sales, more products, more customers, more employees, more branches or more assets.
Example: Urwibutso growing from one bakery in 1983 to many products and branches.
Definition
Internal growth (organic growth): growth that comes from the business's own activities: selling more, adding products, opening branches or investing profit in new equipment.
Example: reinvesting the bakery's profit in juice-making equipment in 1999.
Definition
External growth: growth by joining with other businesses: a merger (two businesses agree to become one) or a takeover (one business buys another).
Example: two bakeries in the same town merge into one bigger company (an illustrative example).
Definition
Diversification: growing by adding new, different products or entering new markets, so the business does not depend on a single product.
Example: a bakery that adds juices, then chilli oil, then biscuits.
| Way of growing | Type | Example |
|---|---|---|
| Sell more of the same product to more customers | Internal | More travellers buy Urwibutso doughnuts |
| Add new products (diversification) | Internal | Juices from 1999, later chilli oil, wine and biscuits |
| Open new branches or sell in new markets | Internal | Branches around Rwanda; chilli oil sold abroad |
| Invest in more capacity: machines, buildings, workers | Internal | Juice-making equipment; hundreds of jobs |
| Recruit more members (for a cooperative) | Internal | A honey cooperative grows from 25 to 60 members |
| Merge with, or take over, another business | External | Two bakeries become one company |
Most businesses pass through stages. Growth is one stage, and it does not last for ever: a business that stops improving usually reaches a peak and then declines. Businesses that last, like Urwibutso, keep renewing themselves with new products or markets.
Tip
Bigger or better? Growth means bigger: more sales, workers, products or branches. Success means better: profit, happy customers, goals met. The best businesses grow and succeed at the same time, but one does not guarantee the other.
Worked example
Worked example: is it growth, and what kind? (illustrative cases)
| What happened | Growth? | Reasoning |
|---|---|---|
| A hair salon in Huye adds nail care and hires one more worker | Yes, internal | New service (diversification) and more staff, paid for by the salon's own activity |
| A shop raises its prices and sells fewer items; its sales stay the same | No | Nothing has increased: same sales, same size |
| Two SACCOs in neighbouring sectors merge | Yes, external | Growth by joining with another organisation |
| A farmer rents a second plot and employs two workers | Yes, internal | More capacity and more jobs from the farm's own investment |
Urwibutso's own growth adds up to about jobs, from a start in 1983 with one small bakery.
Warning
Growing too fast can sink a business. A business that opens branches or buys machines faster than its cash allows may run out of money to pay suppliers and workers, even while its sales rise. Growth must be planned and paid for: with profit that has been kept in the business, or with borrowing the business can repay.
RwandaTV (RBA), "IMPAMBA Y'UBUMENYI: Umuhangamirimo mu rugendo rw'ubuzima Dr Sina Gerard" (in Kinyarwanda, about 32 minutes, 2022). Watch for how he describes the start of the business and each step of its growth.
Practice
Sources and credits
Written by Ganzaa: the timeline and life-cycle drawings, the tables, the worked example and the practice items. The salon, SACCO, farm and honey-cooperative examples are illustrative. This lesson adapts CC BY-SA material and is shared under CC BY-SA 4.0.
