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What Is Your Growth Resource Ratio?

Many entrepreneurs simply don't allocate enough resources to achieve their goals.

What Is Your Growth Resource Ratio?

Many moons ago I worked with a small business that was stagnating. Operating costs were rising more rapidly than sales, leaving only one logical outcome if something didn't change soon.

During the course of my analysis I discovered that there were two dozen employees, yet only one of them served in any marketing or sales capacity. No wonder the business was floundering!

This isn't an isolated anecdote. In my experience, the vast majority of business owners simply don't allocate enough resources to growth. They plan ambitiously, but manage conservatively.

In an effort to separate the walk from the talk, I've coined a completely made-up metric: the Growth Resource Ratio. Simply divide the resources (i.e. time or money) that you allocate to growth (i.e. any activity that has a direct impact on turnover) by your total resources.

The typical Growth Resource Ratio for most post-startup SMEs is less than 10%. That's pretty awful, assuming you're serious about scaling your business.

So why is it so low?

First, most entrepreneurs have no clue how to grow a business. They know how to install IT networks, repair cars, or bake confectionery, but building a business that can profitably render those goods or services without their constant involvement demands a completely different set of skills.

Second, many of them lose their way. It's easy to prioritise growth when your business is small and simple, because there's nothing else competing for your attention. It's a lot harder to maintain the same vigilance when you have people to lead, suppliers to coordinate, cash flow to manage, admin to handle, etc.

Finally, most owners aren't serious about scaling their business. They're content with modest growth at a comfortable pace that doesn't require a disproportionately larger share of their resources.

So I'm curious: what is your Growth Resource Ratio? And how well does it match your ambition?