The Difference Between a Business Recovery and Business Growth
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There are numerous businesses starting to reopen and recover from the past months of slow or no business. Sales are starting to rise as customers are starting a buy again, both of which are great signs for a business recovery and business growth. Now let us talk about the difference between a business’s recovery and growth.
Let us use an example to explain the difference between a business’s recovery and growth.
A business has stable revenues of $100 dollars.
Then revenues fall by 50%, so a business now has revenues of $50 dollars.
What is the revenue increase a business needs to get back to $100 dollars in revenue? The answer would be 100% increase in revenues to get back to $100 dollars in revenue. i.e. $50 times 100% give a business a $50 dollar increase in revenues. When this revenue is added to $50 dollars of continuing revenue the business had, the business would be back to $100 dollars in revenue again.
Technically, a business can say that there was a 100% increase in revenue growth, based on the lower starting point of $50 dollars. But a more realistic way is to have a business state that there has been a 100% recovery of the 50% of the revenue lost getting a business back to the starting point of $100 dollars of revenue. Either way, a business’s revenue has increased, but a business is only back to the point before the revenue reduction of 50% took place.
To highlight the difference between recovery and growth. If a business had $100 of revenue at the end of Year 1 and lost $50 dollars of revenue at the start of Year 2, but ended Year 2 with $100 dollars of revenue, the year over year growth of a business would be ZERO.
Therefore, to have a business experience true revenue growth, a business needs to pick their revenue “high water mark” as a baseline to determine whether a business had revenue growth or a business recovery.