What is a Growth Rate?

By December 7, 2016growth

When I was a kid, I think I drove my Mom nuts wanting to constantly have my height measured.  We had so many marks on the wall next to our garage door and dates next to them it looked more like someone had painted a messy, grayish, stripe next to the door.  I wanted to know how much I was growing.  I never understood why some days it seemed lower than previous measurements, but of course I never recorded those.  Who wants to think they are shrinking!

Looking back at that wall, it was clear that during the early teen years I was going through a growth spurt because the tick marks were further apart.  As a child, I just wanted to know how much I grew. As an adult, I think what would have been more interesting would be my growth rate, or how much I grew over time. That way, I could have known when I was growing faster, or starting to finish my growth spurt. My Mom might have known to wait a little longer to buy that next pair of shoes or jeans or at least had me wear flip-flops for awhile since I was outgrowing everything.

So how does this relate to our businesses? Usually, marketing teams measure how many leads they brought in a month, or how many people attended a webinar or how many times their content was shared socially.  Sales teams measure how many leads they get, how much they close, and how much commission they are making. These numbers are reported to the leadership team and then they decide where to invest and the next month.  These are all numbers that should be measured and tracked as they are all great indicators of performance at micro levels, but they are just tick marks, not truly indicative of real performance, real growth. Most organizations miss the real metric they should be tracking, the growth rate.

Why is Growth Rate Important?

A growth rate is calculated uniquely from one company to the next, but basically, it is a measure of how fast a company is growing, not growing, or achieving its goals. It is the ultimate indicator of business (or ministry or non-profit) health. The only reason a company would not be interested in this rate is if they are happy with the status quo or just don’t care anymore. A growth rate can tell you if business is slowing down before you get into the red. If a growth rate starts decreasing, you know that even though you may be growing, you are slowing down for some reason. It could be purely environmental in nature such as seasonal changes, but unless you track your growth rate over time, you won’t know if you’re having abnormal declines in business or something more normal in the business season.

Knowing your growth rate is a simple task. It is so rarely used by businesses and executive teams, except by those serious about growth, yet it gives such a significant advantage. If your growth rate is positive, you are heading in the right direction. If its negative, then you need to figure out why in a hurry, you don’t want to get shorter do you?

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