Profitability is back
Growth Index companies can operate in any sector. They can be B2B or B2C, growing organically or via M&A. What unites them is their ability to transform their top line, putting them on a trajectory to be major players of tomorrow.
That doesn’t mean our cohorts stay the same year to year. In 2024 we have seen for the first time, that the great majority of the UK’s fastest-growing companies haven’t taken major external funding, whether from public or private investors. Of the top 100, no fewer than 70 have done it the hard way, using their own earnings to bankroll their extraordinary growth.
Profitability is back. While there are still loss-making tech platforms, they’re rubbing shoulders with cash-generative, family timber firms, antiques shops and precision component manufacturers.
We’re seeing this change because circumstances demand it. The drying well of equity funding means it’s harder to grow at a loss, while inflationary pressures and the end of cheap credit give a growth advantage to companies with healthier margins, making them more resilient and better able to pivot to new opportunities. Under such conditions, many company owners are actively choosing to self-fund, compounding the effect.
Seeking profitable growth doesn’t have to mean growing more slowly. Indeed, remarkably this year’s cohort grew significantly faster on average than those of previous years, which I put down in part to the intelligent way that the best businesses approach belt tightening.
Top founders and CEOs have always understood that you can’t succeed without a high-calibre leadership team requirement, but increasingly they’re finding more creative responses to those talent needs. Fractional and interim senior executives are becoming more common, as is the strategic, specialist non-executive director. We’re also seeing increased investment in automation and AI, with its promise of higher productivity. All offer ways of getting more bang for your buck, if you use them properly.
This is not to suggest that all companies on our list have needed such discipline. Some self-funded companies had sufficient margins or cash reserves to continue growing at full pace. Others could never have grown as fast as they needed without external financing, but were successful at getting it.
What this year’s GX confirms for me is rather that growing revenue and making a profit are not mutually exclusive goals. Indeed, it’s a return to the old wisdom that profit is sanity. This is something to be welcomed, not least because profitability is essential for good growth: without it, an enterprise cannot be sustainable. And if revenue growth and profit can go hand in hand, why can’t financial return and social impact?
An environment for success
Whether already profitable, profit-seeking or pushing pedal to the metal, no high-growth company operates in a vacuum. Many leaders privately raise concerns about what they perceive as the increasing burden of legislation and regulation on both top and bottom lines.
As advocates for good growth, we encourage more responsible business practices. It clearly makes for a delicate balancing act for policymakers, but it’s important for our common future prosperity that bureaucracy doesn’t become stifling for growing companies.
If the UK wants to become a superhighway, rather than a pothole economy, then we need to create the conditions for growth, fast. Whoever’s setting the political and economic agenda next year, I hope they take that into account.
At the same time I have full confidence that the UK’s growth champions will find a way regardless, and look forward to the great things they will achieve in the coming year. If there’s one lesson I’ve learned working with so many extraordinary companies and visionary leaders over the years, it’s that they never lose the ability to surprise.
