Organic business growth is related to the growth of natural systems and organisms, societies and economies, as a dynamic organizational process, that for business expansion is marked by increased output, customer base expansion, or new product development, as opposed to mergers and acquisitions, which is inorganic growth.
Inorganic growth is the rate of growth of the business, sales expansion etc. by increasing output and business reach by acquiring new businesses by way of mergers, acquisitions, and take-overs. This kind of growth also takes place due to government directives, leading to enhancement of business in some identified priority sector/area. The inorganic growth rate also factors in the impact of foreign exchange movements or performance of other economies.
Annual Growth Rate
The Annual growth rate is a useful tool to identify trends in investments. According to a survey of nearly 200 senior marketing managers conducted by The Marketing Accountability Standards Board, 69% of subjects responded that they consider average annual growth rate to be a useful measurement. The formula used to calculate annual growth rate uses the previous year as a base. Over longer periods of time, Compound Annual Growth Rate (CAGR) is generally an acceptable metric for average growth rates.
Compound Annual Growth Rate
Compound Annual Growth Rate (CAGR) is a business and investing specific term for the geometric progression ratio that provides a constant rate of return over the time period. CAGR is not an accounting term, but it is often used to describe some element of the business, for example revenue, units delivered, registered users, etc. CAGR dampens the effect of volatility of periodic returns that can render arithmetic means irrelevant. It is particularly useful to compare growth rates from various datasets of a common domain such as revenue growth of companies in the same industry.