The Small Business Forum
The Growth Stage (contd)
- Increasing profitability requires sales, efficiency, and cash generation.
- Efficiency is reducing the quantity of output per unit of input or cost. It can be improved by:
- quality of raw materials, technology, or better skills.
- cost control,, reducing cost per unit of production.
- reduction of inputs, prices, or better processing.
- Cash generation requires:
- Credit control to ensure the sales translate to cash. Cash is important to finance the sales growth.
- Costs include working capital costs to cover the increased sales operations, staff, and marketing. Finance includes loans and equity. Loans can be obtained at this stage. The business also generates cash flow and profits that can be reinvested.
- Growth stage may be reached by the third year of operation. The length, however, varies and may be shorter or longer for different businesses and sectors.
Comments, Questions and Suggestions welcome.
drkibuka@thesmallbusinessforum.co.ke
+254-729524219
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