This article is an extract from The Entrepreneur Magazine and was written by David Meier

Most entrepreneurs have available to them more than one way to grow their businesses. The process of deciding on a growth strategy is ongoing, and the decisions that result can be critical to future success.

The search for real business growth, by creating permanent increases in profit as a direct result of measurable and sustained increases in sales volume, may not only be a reaction to opportunities in the marketplace, but also a requirement in order for your business to maintain market share.

The right decisions can conceivably have a major positive impact on your business’s bottom line, thereby creating real growth. However, if you choose unwisely, or decide to do nothing when action is clearly warranted, the results can lead to a loss of growth potential, or even a period of negative growth (decreased sales and profitability).

As with so many issues in business, growth decisions should be based on objective financial data, consisting of relevant estimates and projections. Not every growth strategy can be expected to impact a business in the same manner, and over the same time period.

Think of your decisions in the context of ROI analysis. Each growth opportunity has an investment component, rands you will be required to spend as a part of the process of implementing a specific growth strategy. The corresponding return you can expect from your investment in business growth can be represented as the increased profit your business is projected to incur, directly as a result of the sales increases created by your growth strategy.

For example: a retail business is considering growing by adding a new product line. The required investment to add the line is R300 000. This addition is expected to add R200 000 in annual sales, and as a direct result, a corresponding R50 000 increase in annual net profit. Therefore, the anticipated ROI from this additional (product) line is in excess of 16% (R50 000 divided by R300 000).If the business is currently enjoying an overall 25% ROI, the question the owner must answer is, “Should I invest R300 000 in the addition of the new product line to earn an ROI that is nearly 9% less than my business is currently earning (25% - 16% = 9%)?” The correct answer appears to be an obvious “no,” but there may be other business reasons that would cause the owner to decide to add this product line, such as the presence of a strong market demand for the new items.

In any event, once each growth strategy is converted into an ROI percentage, you can compare dissimilar growth options, and ROI can be used as a critical financial component in any business growth decision. Furthermore, just as ROI analysis can be used to evaluate these additional growth strategies, it also can be used to evaluate business ideas, such as those of entirely new businesses. And fortunately, ROI analysis can be applied to these new business ideas well before an owner ever decides to invest in that new business.