Setting growth targets for your business is a crucial step in planning for the future. However, what constitutes a reasonable growth target can vary significantly depending on various factors, most notably your company’s maturity in the market. Let’s delve into this concept and explore how to determine the right growth target for your unique circumstances.
Mature Companies:
For mature companies that have been in the market for a considerable time, achieving astronomical growth rates can be a challenging feat. In such cases, it’s essential to recognize that growth is likely to be more modest. This isn’t necessarily a negative aspect; rather, it reflects the reality that as a company matures, there is increasingly less room for exponential expansion.
Instead of aiming for double-digit growth percentages, which might have been attainable during the early stages, mature companies may find low single-digit growth to be more realistic. However, it’s crucial to understand that this lower growth rate doesn’t necessarily equate to stagnation or failure. In fact, for a large, well-established brand, even a small percentage of growth can translate into substantial revenue gains.
Consider this scenario: A well-known company that already commands a significant share of the market might achieve 3% growth in a year. While this may seem modest, when applied to a multi-million or billion-dollar business, it can lead to substantial revenue increases. In this context, modest growth is not only reasonable but also strategically sound.
Less-Established Companies:
On the other hand, less-established companies, especially startups or businesses operating in highly dynamic markets, can reasonably set more ambitious growth targets. These companies often have a smaller customer base and market share, leaving ample room for expansion.
However, it’s essential to strike a balance when pursuing ambitious growth. Setting excessively high targets can lead to overextension, diminishing returns, and even financial instability. Understand your market’s growth potential and consider your resources and capabilities before setting your sights too high. Aiming for double-digit growth might be achievable, but it’s crucial to have a realistic and well-informed strategy to support it.
Marketing Return on Investment (ROI) Target:
When deciding on your marketing return on investment (ROI) target, it’s important to remember that higher ROI is not always the best choice, especially if your primary goal is rapid growth. Sometimes, achieving your growth targets may require sacrificing some profitability in the short term.
For instance, imagine you have the option to invest in two marketing campaigns:
- Campaign A has an ROI of $2, which means for every dollar invested, you get $2 in return.
- Campaign B has an ROI of $3, offering a slightly better profitability ratio.
In this scenario, a marketer aiming for rapid user growth might opt for Campaign A, even though it has a lower ROI. Why? Because Campaign A generates twice the user growth compared to Campaign B, despite being less profitable in the short run.
The key takeaway here is that the right ROI target depends on your company’s growth objectives and financial situation. Sometimes, the best target is the one that keeps your company in business while allowing you to scale and expand. Sacrificing a bit of profitability for faster growth can be a strategic choice if it aligns with your long-term goals.
In conclusion, setting growth targets is not a one-size-fits-all endeavor. It depends primarily on your company’s maturity in the market and your specific business goals. Mature companies may aim for more modest growth, while less-established ones can pursue ambitious targets with caution. When it comes to ROI targets, prioritize what aligns with your growth objectives, even if it means temporarily sacrificing some profitability for the sake of expanding your market presence and customer base. Ultimately, a reasonable growth target is one that aligns with your company’s unique circumstances and strategic vision.
