Measuring business growth: a practical guide for UK businesses
Guide
Rising turnover is only part of the picture. Here are the figures that show whether a firm is genuinely expanding, how to record them steadily and how to interpret them as a set.
Why it's worth measuring business growth
It's easy to feel flat out while getting nowhere. Putting figures on growth gives you evidence to line up period by period, so you know whether your decisions are paying off.
Four business growth metrics to start with
Four measures make a sensible start for most SMEs, and the figures usually sit in Xero, Sage or QuickBooks already:
- Revenue growth rate: how fast turnover rises or falls between two periods. See how to work out your revenue growth rate.
- Customer growth: the change in your number of active customers.
- Customer retention: the proportion of customers who keep buying from you over a period.
- Gross margin: the proportion of turnover left once the direct costs of what you sell are covered.
What each measure tells you
| Metric | What it tells you | How often to review |
|---|---|---|
| Revenue growth rate | Are we selling more than we used to? | Each month or quarter |
| Customer growth | Is our customer base expanding? | Each month |
| Customer retention | Do customers keep coming back? | Each quarter |
| Gross margin | Is the growth making money? | Each month or quarter |
Looking at the figures as a set
One figure alone can mislead. A Leeds e-commerce brand might see turnover climb as its margin narrows, or win new customers while losing loyal ones. Weigh growth and quality measures together before deciding what they mean.
Find out your Growth Score
Combine these figures into one score and find out where to concentrate next.
Frequently asked questions
How often should I check business growth?
Monthly for quick-moving figures such as turnover and new customers, quarterly for slower ones such as retention; your quarterly VAT returns can double as a review point. Above all, keep the periods identical each time.
What counts as a good growth rate?
It varies with your sector, size and stage. Measure against your own track record first, then against comparable businesses.