What is an acceptable rate of growth for a small business during the first five years?
I have a small health care related business that I purchased from another doctor five years ago. Collections increased 20 percent in the first year of ownership, 22 percent in the second year of ownership, 8 percent in the third year of ownership and 7 percent in the fourth. What is a reasonable percentage of growth in collections from year to year? Am I looking at the right number by measuring growth in collections?
There is no rule hidden somewhere that an expert can retrieve and share with you. The acceptable rate of growth is what you accept until you have bosses or owners or investors that establish something else. Industry overall grows about the same rate as the economy, which is 2-3% in a good year.
It's only the outside forces, like investors or banks, that demand certain growth rates. If you own it yourself, you demand that growth of yourself. By the way, 20 percent+ is outstanding growth, 7-8 percent per year is higher than average.
Tim Berry is the chairman of Eugene, Ore.-Palo Alto Software
, which produces business-planning software,