The Wise Entrepreneur

9 Principal Reasons Why Revenue Growth In An Enterprise May Be Useless

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I’m back again after skipping last week’s post due to too many movements and hardly time to sit down and write something serious – my sincere apologies.

Let us proceed and look at reasons why revenue growth in an enterprise may be useless. There are situations where an entrepreneur sits comfortably by simply glancing at revenue growth figures presented in the financials, or by the accountants, without having any further thoughts as to whether these make sense or not. Looking deeper into the figures or numbers as some people put it is vital for an entrepreneur. This again, is another reason why I always insist that an entrepreneur should be financially intelligent.

Ok now; your business is registering impressive revenue growth numbers. But what do these numbers mean to you and your business? Do they make sense or not? Does this apparent growth translate into tangible benefits for your business? Is this growth free of any encumbrances that may significantly water down its impact? Are the numbers solid enough for you to rely on? So, what are the situations under which you could consider discounting the value of that revenue growth, or where the growth might be useless or valueless?

Let’s take a look.

  1. Inflationary tendencies. What inflation rate do you have in your country or location where you are doing business? Have you discounted its effect on your sales growth? Come on; don’t start bragging about achieving a 30% revenue growth when inflation in your territory is 35% per annum. Don’t even laugh at this percentage and think that I’m inflating issues. Just do a simply search on the internet and you will discover that some parts of the world are that bad anyway. I won’t name those areas so that nobody accuses me. If your country statistics are much better than that, focus on the principle anyway. Revenue growth can be misleading and useless if the inflationary factor is not taken into account. Ok? Point number one.
  1. Overdependence on one large or a few customers. Assume that you are registering stellar revenue growth but you are relying on one or two clients or customers that are keeping you smiling from ear to ear. Is this really solid and reliable growth? Can you guarantee that in the next three to five years you will still be smiling? Of course not. Clients and customers change and move, unless you have extremely nice products and services that keeps on bringing them back. Achieving customer delight however is not an easy game. Don’t you agree with me? So, before you rejoice and go to the beach because of your revenue growth, try and check the profile of your customers giving you that growth. Check the sustainability of the growth. If you see some risks, stop smiling and get to work to stabilize your revenue over the years. Do you get me? Point number two.
  1. Opportunistic and non-repetitive business. Revenue growth can also be useless and valueless if it is arising from opportunistic, one off and non-repeat business. Now, I know you may argue with me and say that revenue comprises many opportunistic deals and businesses. I will not argue with you. Ok? What I’m saying is that opportunistic or ‘once chance’ (the way Nigerians put it) is not the basis for building a business in the long-term. It can be misleading and hence useless. It can make you dumb while you should be smart and moving on to identify new solid businesses growth opportunities. So, Mr. Entrepreneur, don’t go to sleep because you have locked in one astonishingly good but odd deal. Keep one of your eyes open at least, if you want to nap a little. Point number three.
  1. Withdrawal of competition. This is another no-brainer situation that should not make a serious entrepreneur laugh and rejoice over revenue growth. Revenue growth could be temporary, and arising from withdrawal of key competitors because of obsolete products and services, rising costs and other factors. The point is this; the same obsolescence and rising cost factor will catch up with you soon unless you are working on something very unique. Don’t you think so my dear entrepreneur? Smell the coffee man! Your competitors are not opaque when they withdraw due to such valid and researched reasons (of course some will run when no one chases due to ill-conceived reasons). Sometimes CEO’s and companies make dramatic U-turns in strategic decisions and statements. This year they have made a decision to withdraw from some market. Next year they are revisiting their position. The following year they have made a decision to reinvent the business and stay. Don’t make me laugh with those corporate pronouncements! Sometimes it’s comical. Point number four.
  1. Huge discounts and lower margins. Another principal reason why revenue growth in an enterprise may be useless is when that growth comes with very huge discounts and lower margins. There are some entrepreneur folks and their marketing ‘gurus’ that sometimes make very dangerous discounts that can make accountants’ hearts fibrillate (I mean acting real chaotic and irregularly). Sometimes they get away with it, and you can’t blame them because sometimes they are very clueless about the impact of their decisions. Those big sales numbers can be very bad for the business if you are booking big losses also. Really bad! So, don’t start dancing because your revenue numbers are on the rise when you are achieving this at a high cost of discounts and lower margins. It will not last. I promise. If you can do that every time and year after year, for long periods of time, then give me a call and I come over to learn something new in business. Ok? Point number five.
  1. Fast but dangerous growth. Revenue growth in a business can be useless and dangerous if it is associated with dangerous growth. Organic things are good. Organic business growth is also good though sometimes you may use other means to prop it up somehow. Hybrid and genetic modification to achieve results have their pluses and minuses, but I believe you know that people are beginning to run away from some of these. What I’m saying is that very fast and dangerous business growth is sometimes associated with reduced quality, poor customer or client service, cash flow problems due to uncontrolled growth, overworked and stressed staffs, brand dilution, huge debts etc. So, my question is this; is your growth good and sustainable, or is it growth per se? Are you not over speeding? Will you not lose steam so quickly in your entrepreneurial adventures? Take care and review that revenue growth associated with recklessness, otherwise your business will soon become a dinosaur. I’m not threatening you! I’m just speaking the truth in love. Point number six.
  1. Revenue growth without profitability. Significant revenue growth could also mean nothing and be useless as salt-less salt, due to the growth not being profitable. This could be because of poor cost control, spending everything that comes in, bad product mix, high customer or client acquisition costs, high selling and distribution costs, high operating costs etc. Do you understand what I’m writing here Mr. Entrepreneur? Be smart! You are in business to make some money even if you try and disguise this with big grammar about vision, mission, and service to humanity, creating impact etc. Again, we won’t go into arguments about the existence and rationale for business. I don’t care whether you grow your revenues to zillions of whatever currency you like, but if that growth is not associated with profitability and reasonably good return on investment, it does not impress me. Period. Point number seven.
  1. Losing sight of vital business issues. This is another principal reason why revenue growth in your business might not mean much. My dear entrepreneur, don’t only rely on overrated revenue growth metrics and ignore other factors such as efficiency and effectiveness metrics, business model, branding, risk profile and risk management, structure, solvency status, enterprise positioning etc. Are you still with me, or you have switched off because I’m yapping too much? Beyond the revenue numbers, and in those things not seen with the naked eye, lie important issues that you must work on if you really desire to build a great and lasting enterprise. Revenue numbers can be very deceptive and could lull you into a deep sleep while other things go wrong or remain unattended to. Open your eyes! Point number eight.
  1. Inability to leverage on that revenue growth to improve others areas of the enterprise. My last but not least principal reason why I think revenue growth in an enterprise may be useless, is when an entrepreneur or the enterprise cannot leverage on this revenue growth to positively impact other areas of the business. For example, if you cannot leverage to retain good staffs, develop great leaders for your business, carry out research and develop new and great products and services for the next generation etc., then you miss the point. By the time you lose out in the market and run bankrupt, possibly your eyes will start seeing the future of business in a better way. Do you understand me? Leverage, leverage and leverage any advantage you have now, because the future is a bit uncertain. Think long-term. Think strategic. Think global but act locally. This is point number nine and I’m out.

As I call it off for today, I do hope you have had a terrific time reading this blog! Candidly, and I mean candidly, not every revenue growth in a business is worth celebrating. The smart entrepreneurs know this, but unfortunately some other entrepreneurs are clueless. In this blog we will always share very useful things. I promise. Keep on visiting this blog and share it with as many as you can, and thanks for that.


The Wise Entrepreneur

Picture of Clayton W. L. Mwaka

Clayton W. L. Mwaka

Clayton W. L. Mwaka, a Ugandan chartered accountant and motivational speaker with 24 years of diverse experience, specializes in business administration, international consultancy, and lecturing. He advocates for personal empowerment through balanced living, qualitative leadership, and paradigm shifts, aiming to unlock individual potential globally.

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