Organic Growth
BeginnerOrganic growth is growth a business achieves from its existing operations, through selling more, raising prices or launching new products, rather than by buying other businesses.
Organic growth reflects how well the company's own business is performing. It comes from attracting new customers, selling more to existing customers, increasing prices, expanding into new locations or developing new products.
For example, if a company's revenue grows from 100 million to 112 million, but 7 million of the increase came from a business it acquired during the year, its organic revenue growth is 5%, not 12%.
Companies often report organic growth separately because acquisitions and currency movements can make headline growth look stronger or weaker than the underlying business really is. Removing these effects gives a clearer view of real performance.
Investors usually value organic growth highly, because it shows that customers want the company's products and that it can grow without spending large sums on acquisitions. Organic growth is generally less risky than inorganic growth, though it can be slower.
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