Factors of Business Growth: A Decomposition of Sales Growth into Multiple Factors

摘要

The growth is an important stage of lifecycle for all for-profit organizations. The sources of business growth have been subject to a considerable academic attention. At the same time, growth of sales is a normal aspect of the phenomenal growth of a company. In this paper, we extend a previously created model of business growth which has been based on the analysis of two terms: the average bill and the frequency of visits, and their impact on the overall sales growth. We identified fourkey factors affecting growth of sales over time: labor productivity (sales-per-worker), labor intensity (workers-per-assets), capital intensity (assets-per-customer) and frequency of visits (customers per time unit). Since these factors are in a multiplicative form, we also proposeda logarithmic decomposition of business growth into a sum of partial factors in order to examine the contribution of the individual factors to the total sales growth. We also illustrated the use of the model on a case study of a company operating in the field of electricity sales in the Czech Republic. The model is straightforward and suitable for management of small and medium sized companies and can be used in the education of entrepreneurs as well.