Sustainable Growth

Sustainable growth is one of the most important measures of business success and is listed among 37 variables that determine success like market share, market growth, marketing expense to sales ratio or a strong market position. Sustainable growth does not just happen, it must be planned. Technically, a sustainable growth rate (SGR) is the maximum rate of growth that a business can sustain without resorting to outside capital raising for growth. SGR measures how fast a firm will grow without external financing. After a firm has passed this rate, its growth will decline in the long term, and it has borrow to facilitate additional growth. SGR is the optimal rate of growth from a financial perspective within the firm’s specific financial strategy defined its financial policies.

Implementing a strategy to increase SGR is complicated since it is the product of return on equity (ROE) and Plowback Ratio after dividends are paid to shareholders. A simple SGR calculation is: ROE x (1 – dividend-payout ratio) The SGR formula assumes that a company will maintain a target capital structure of debt and equity,(D/E Ratio) keep a consistent dividend payout ratio, and accelerate sales as quickly as the organization allows.

Sustainable growth planning begins with strategy developing key metrics based on OKR, KPIs, KRIs, market planning, positioning and segmentation. Both quantitative and qualitative analysis including finance, accounting, marketing, human capital management are required too accurately forecast outcomes. For strategy implementation myriad strategic models and frameworks should be deployed to ensure performance metrics and score cards are tracked which for key milestone attainment.  are central to all successful organizations for review of organizational specific variables unique to your industry for situation awareness and action planning. OKR is a strategic framework, whereas KPIs are measurements that exist within a framework, while KRIs are metrics that measure risks to operations.