The Difference Between a Business Recovery and Business Growth
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.