This is the generation with the fastest number of new businesses. According to a survey done by the Small and Medium Enterprise Agency, there are five times as many businesses being registered in this decade than in previous decades.
In Nigeria alone, there are over thirty-eight million registered businesses. If we extrapolate to the whole of Africa, there should be over two hundred million registered businesses. However, most of these businesses are in the micro stage and will remain so for as long as they exist.
The reality of this situation is that many of our side hustles or micro enterprises might end of dying if we don’t scale them. However, most businesses will not scale if they don’t have a high-growth potential.
So what does it mean for a business to be high-growth? A high growth business is defined as a business with more than 20% annual growth rate for a consecutive 3 year period.
This sort of growth rate is usually difficult for small businesses that are either not innovative, lack access to capital, have poor businesses skills, and are faced with infrastructural challenges.
Also, some industries have a greater potential for high-growth than others. For example, with the growth in consumption of entertainment content online, an online content provider like Linda Ikeji TV or EbonyLife On will grow at a faster rate than a traditional cable channel like DSTV or Kwese.
One of our clients on our Business leaders circle program who was a pioneer in the natural hair industry saw her business grow over 500% in a 5 year period because she was an early mover who took her business seriously in an industry with a high-growth potential.
So what are the qualities of high-growth businesses?
One of the challenges of small businesses is customer acquisition. A lot of organizations find it difficult to acquire new customers at a fast enough rate to cover its overhead and expand.
A typical high-growth business has a faster customer acquisition rate. Usually, their products or services are so good that existing customers are willing to tell new customers about it.
We asked some of the members of our business leaders circle program to do a survey to find out how they were acquiring new customers and we were pleasantly surprised that over 60% of their new customers were coming through word of mouth. Which means existing customers were telling more people about them.
Customer acquisition is important, but customer engagement is much more important. With the rise of technology-driven businesses, customer engagement and retention have become necessary.
Recently, when I was traveling to the US, I wanted to buy my ticket from my regular online travel agency. I had gotten used to buying my ticket from them, but I was not happy with them after a recent experience where I lost some money. I asked my brother to recommend another online travel agency and he recommended a new one which offered me the ticket at a price less than what my original travel agency offered.
They went out of their way to hold the ticket for me and even issued me a ticket immediately, even though I paid long after their closing hours. I have decided to do my future travel transactions with them.
High-growth businesses are not just concerned about acquiring new customers, they are willing to do what it takes to keep them.
If your business is subscription based, you will need to be able to keep your customers engaged for them to keep renewing their subscription.
One of my favorite money quotes is, ‘Turnover is vanity, profit is sanity, and cash is king.” A sustainable high-growth business should have a reducing cash burn rate per customer acquisition and overheads. When I speak to SMEs, a lot of them complain that their business is making money, but they cannot see it.
This might be because they are spending the money as fast as they are making it, or they are making just enough to cover their overheads and no extras to put aside for future expansion. Apple is one of the most valuable companies in the world because it is cash rich!
Other factors that will determine a high-growth potential is a company’s ability to innovate. Businesses who have an ability to understand market trends and respond to it quickly at scale will grow quickly.
Our intention as an organization is to help African businesses with a high-growth potential to scale, as well as help more businesses unlock and implement high-growth business models.
Some immediate ways we are doing it is through our annual year-end event which is aptly themed ‘Think High Growth.” You can learn more about it HERE.
We are also opening up our Business Leaders Circle Program for just twelve new members in December. If you want to be part of a community of visionary entrepreneurs that are scaling their businesses, you can join the waiting list HERE.