3 Drivers of Economic Growth

Sometimes business owners fail to understand or focus on the basic elements of growing a business. As a consulting firm, we have a distance from the business that allows us to see things that business operators often miss. The funny thing is that we miss them in our own business.

I remember talking to my Uncle Albert about this as a kid. He owned a house painting business that was very successful. It afforded him the opportunity to live on Plain Street in historic Lewiston, NY. It is a charming street of grand, three-story homes with pillared center entrances. Because it is located in the historic district of town, each home was painted white. The only whimsy was the color of the trim. Most homes along the street choose the stately color of black for the trim. My uncle painted every home on the block except his own.

Economic growth in your business is driven by the same three factors that drive the economic growth of our nation. Regardless of your enterprise, this does not change. Capital, Labor, and Productivity are the three primary economic drivers of growth.

Capital

Strategically, capital is a hard one to manage. Our government runs at a capital deficit of somewhere over $18 trillion dollars. The United Kingdom has about $2.2 trillion in debt. Zillow has $520 million in cash and $230 million in debt with a negative profit margin of 23%.

My businesses have zero debt. I must be doing something wrong. Right? Do MLSs or associations of REALTORS® carry debt? Probably not. Or, if they do, it’s on a building where they have a favorable debt-to-equity ratio. Do brokerages carry debt? Some do, others don’t.

Interest rates in America are at their historic lows. Using leverage, businesses have a rare economic opportunity to grow tremendously. Having a good capital strategy will allow you to fuel growth in your business.