Essentials to Sustainable Revenue Growth


One of my favorite indicators of business success is:  Growing Sustainable Revenue.  The sustainable growth rate in a business is the maximum growth rate a business can achieve without having to increase its financial leverage or debt financing. Stated another way, it is the maximum growth rate that can be achieved given the company's profitabilityasset utilizationdividend payout, and debt ratios.

Here are three keys to sustainable revenue growth:

Resultist-Icon-20x20.pngConnect with your prospects & clients

Resultist-Icon-20x20.pngUnderstand what they want to achieve

Resultist-Icon-20x20.pngDeliver to beyond their expectations

While it sounds simple, a commitment of time and effort is required.  Often there is resistance to changing the mindset, as a team develops new habits.  As an executive improves skills to manage change, it is much more difficult with four generations now in the workplace. There is no "one size fits all" solution. 

Successful change management is the result of:

Resultist-Icon-20x20.pngEngagement – Connect with your team, employees, vendors, prospects and clients

Resultist-Icon-20x20.pngExpectations – Make realistic commitments that you will live up to

Resultist-Icon-20x20.pngExecution – Pay attention to the details, follow-thru, and follow-up

Companies that excel at change management are also those that successfully adapt and adjust to changing market conditions.  They are the companies enjoying profitable revenue growth. Successfully manage change – you’ll capitalize on opportunities and grow sustainable revenue!

From the financial perspective:

The sustainable growth rate according to Robert C. Higgins is the maximum growth rate a company can achieve consistent with the firm`s established financial policy.

Basically, it is calculated as:

SGR = (pm*(1-d)*(1+L)) / (T-(pm*(1-d)*(1+L)))

  • pm is the existing and target profit margin
  • d is the target dividend payout ratio
  • L is the target total debt to equity ratio
  • T is the ratio of total assets to sales

In order to grow faster, a company would have to invest more equity capital, increase its financial leverage or increase the target profit margin.

How to achieve long-term growth:

Resultist-Icon-20x20.pngEnsure there is a common understanding regarding growth and profit goals among the management team - this is a prerequisite for an aligned and coordinated strategy and implementation

Resultist-Icon-20x20.pngUnderstand relevant markets (current or future promising markets)

Resultist-Icon-20x20.pngGenerate market foresight when identifying and assessing growth initiatives

Resultist-Icon-20x20.pngSegment-specific benchmarking

Resultist-Icon-20x20.pngIn-depth assessments

Resultist-Icon-20x20.pngMarket demand projections

Resultist-Icon-20x20.pngClearly define and communicate the company vision and strategy


Actively develop and energize the organization

Remember that growth rates are calculations based on past performance. They can't predict the future perfectly. Your actual and sustainable growth rates will not match perfectly. You should use the rates as a tool to guide business decision making, not a metric to paralyze your decision making or stunt your business. The sustainable growth rate gains more meaning as time passes and your business becomes more reliable. 

We have a new Online Revenue Generation Assessment available. (Free)

Before you begin to make a plan for sustainable revenue growth and change management, this assessment will quickly help you understand the current status of your revenue generation opportunities.

Access the Free Online  12-Point Revenue Generation Assessment Here >

Topics: Revenue Growth Sustainability