Determining the right strategy for growth is critical for every business leader. You have countless options at your disposal. So, where should you put your time?

Some of that decision will come down to organic vs. inorganic growth.

Organic growth is growth found in a company’s core operation. It’s a slower method of growing—but it’s a sustainable way to increase market penetration and ties into your company’s strengths.

On the other hand, inorganic growth is growth you see from external activities. It’s a strategic way to tap new customer bases and acquire new assets—often at a faster rate and more cost than organic growth.

So, when it comes to inorganic vs. organic growth, which is the right strategy for your business? Let’s look at eight key differences to know.

One of the primary differences between inorganic and organic growth is the source of growth and how you expand.

Organic growth is the more natural path for companies. You rely on your core competencies and improve internal processes to achieve growth. You continue building new products, expanding to new markets, and organically gaining new customers.

On the other hand, you look externally for inorganic growth. These growth avenues are things like joint ventures or mergers and acquisitions. You join forces with other parties to quickly improve your growth rate.

There are many differences in costs when comparing organic growth vs. inorganic growth. Organic growth is often the least expensive of the two. You won’t usually have large expenses to finance it (outside of potential new internal growth projects). Your focus is optimizing your operation over time—spreading out your expenses and reinvesting revenue.

An inorganic business growth strategy can cost much more. You have many more upfront costs outside of your normal operations. These are things like attorney’s fees, acquisition costs, and integration expenses. You’re trading a larger upfront cost in exchange for potential access to additional revenue streams and resources.

Organic growth is the slower of the two types of growth. It’s focused on expanding slowly in alignment with a company’s internal abilities and capabilities. It’s the more sustainable of the two growth types.

Inorganic growth can come fast. It’s the rapid growth route—where companies focus on scaling quickly. This growth method can also be less sustainable over time while you try to bring together different organizational cultures and processes to build an efficient business.

Risk is something you can’t overlook when deciding on a growth strategy. Inorganic growth may look appealing when you see the potential numbers—but you may find yourself in a bad situation if you don’t prepare. You may get more than you can handle, suffer integration problems with your new partners, and lose agility as you struggle to keep up.

Although there is some risk to an organic growth strategy, it’s much less than its counterpart. You’re more in control of your business and rate of growth, meaning you can stay nimble, adapt more easily to challenges, and take more time with decision-making.

You can’t overlook the impact your growth strategy has on business operations. If you run a lean company, the sudden introduction to new systems from external sources from an inorganic growth source may prove overwhelming. It can introduce complexity, redundancies, and conflict—all of which need a solid plan to overcome.

However, the impact of organic growth will have minimal effects. You’ll still change how your company operates over time. But since you’re in control of the rate of growth, you can gradually expand and update existing processes to account for your growth.

Both organic and inorganic growth have the potential to spur innovation. Organic growth does this from within. Businesses develop new product lines, gain access to new technologies, and develop new processes to spur growth for the company.

With inorganic growth strategies, those innovations can come from external sources. Merging external talent and resources into a business can help teams do more than they could otherwise—giving them a competitive edge that helps them build product offerings they couldn’t otherwise build.

Inorganic growth methods can help companies struggling to keep up with the competition. For example, if a company decides to merge or acquire another business offering similar products, they have one less competitor to worry about. An acquired company fortifies its position in the market.

But if you stick with organic growth methods, you’re at more risk. You’ll gradually increase your market share but may compete heavily with companies with a similar strategy. You also run the risk of moving too slowly and seeing a larger competitor copy what you do and hurt your marketing efforts.

Having control over your growth trajectory can be an asset when running a business. Organic growth methods allow companies to carefully control how fast they grow to avoid biting off more than they can chew. And if you start moving too fast, it’s easier to slow things down to reevaluate.

You may have less control when you rely on external growth. You have partnerships and legal obligations to contend with. These things can bring in new ideas and strategies, but you must consider them and shareholder value in your growth strategy, which means you have less control over how fast you grow and the direction your business moves—things that can detract from your company vision.

From managing your team to streamlining your current operations, you only have so much time in the day to work on your business. You may have the skills to handle whatever type of growth you want, but your time is likely better spent on other business tasks.

That’s why having an experienced partner can help. A financial consultant—like a fractional CFO—can step in and offer advice, creating a game plan for you to follow with your business. You’ll get a roadmap that helps you push your business forward and grow.

Are you ready to start working with a fractional CFO or learn more? Get in touch with us to explore how we can partner with you in your business vision!