A:

Sustainable growth is the maximum growth rate a startup can maintain internally without the need to seek external financing, such as borrowing money or raising funds. It is also a signal to a startup regarding how it should approach its future over the long-term.

Sustainable growth is extremely important for a startup. Through an analysis of sustainable growth, a startup can understand the effectiveness of its operations and how much external financing it may need to continue its business operations and capture the growth it desires.

If a startup has a level of growth that is below its sustainable growth, it means that the business has the capacity to increase its growth, but has not been able to do so. This could be a signal that the company has an inefficient product, business model or operations. If this is the case, the startup must perform a deep analysis of its operations and assumptions to identify its deficiencies and revamp its business approach so it can increase its growth to sustainable levels.

If a startup has a level of growth that is above its sustainable growth, or if it wishes to increase its growth beyond its sustainable growth rate, it means the startup needs to seek external financing. This is actually a common theme with startups, which normally start with smaller organizations that need additional financing to accelerate their growth. In addition, many startups wish to achieve growth beyond what they can sustain internally, which forces them to seek external financing.

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