How to increase your internal growth rate
Before making the switch to using sustainable growth rate as your primary growth metric, it's a good idea to still take steps that will maximize your internal growth rate. By optimizing asset utilization and minimizing waste, you'll see a greater return on assets and, in turn, a better internal growth rate. Companies should regularly evaluate performance and look for opportunities to improve. Not only will such efforts likely improve profits, but they will also accelerate the company's growth rate.
Optimizing existing production processes
There's often room for improvement in the existing way a business operates. Technology changes fast and allows for greater automation, more streamlining, increased staff productivity, and other operational efficiency increases that will help you squeeze additional revenue out of your existing assets. Regularly checking to ensure your business is operating with the most efficient tools and processes available will help keep your IGR as high as possible.
Re-designing existing product
When products become outdated and fall behind the competition in terms of features and usability, they will no longer bring in as much revenue as they could. By looking at how customers are using your products and how the market has changed expectations since the last product refresh, you can re-design your offerings in a way that will see sales increase. This, in turn, will drive growth and increase your ROA.
Eliminating underperforming product lines
Every product your company puts out uses up assets. Products that are not performing very well are utilizing those assets without contributing their fair share back to your net income. When you drop poorly performing products and put those assets to use on better performing products, your ROA goes up.
Adding new lines of business
This tip won't just increase IGR, but it can also serve as a growth driver in its own right. Almost every product has a complementary product, which is something that customers would also purchase if made available. By looking at your product line and figuring out the most logical additions to your income streams, you can capitalize on that fact. This can be particularly effective for increasing IGR because similar products can often share assets, which gives you an increase in net income and results in greater ROA overall.