Is Growth Good For Business?
Here is what happens when you have a growth spurt: You stress all your resources in human and financial terms. The bigger you grow the more complex your business becomes. You must introduce processes, other entities (like banks) and a fair amount of bureaucracy and rules. That’s the opposite of how you started out as an entrepreneur!
I felt ambitious and signed up for a course with the Darden School of Business. The session was called “Growth to Greatness” and the professor, Ed Hess, really brought this message home:
Some businesses die because they are growing!
That isn’t to say that you should curl up in a ball and stop networking, marketing and generally beating your drum to earn more customers. The finesse and the intelligence are in the pace of your company’s growth and a couple of other things.
A favorite CEO’s quote to illustrate the challenge is:
Business is like sailing. You know where you are and where you want to go, but it takes a heck of a lot of tacking to get there.
Here are some core learnings:
- Linear growth is a myth. Real world organic growth happens in spurts. You work for that short term competitive advantage that cannot be sustained long-term because the market and your competitors constantly change the game.
- When you are at a point in your business’ life cycle where you have opportunities to grow what do you do?
Think – is a very good first step! Growth challenges you, your employees, your controls and processes, your technology and logistics, to name just a few.
- Growth does not necessarily equal profit. It requires strategic focus, excess management capacity, transparent processes, checks and balances and an eagle eye on cash flow.
By all means, push that gas pedal but do it wisely by being prepared.
Do you have a strategy? Is it 2 inches wide and 2 miles deep? Meaning a narrow focus on a market segment with many customers, or do you want to be all things to all people?
Analyze your managers and employees; will they be able to grow with you? Will you have to part with some of them or can you re-arrange positions to maximize contributions. A frequent comment from entrepreneurs is that they failed to let people go soon enough and they didn’t take enough time in hiring the right people.
What about processes and controls? When information transfer doesn’t happen by shouting across the hall anymore how will you handle communication in a much more formalized manner?
Which brings us to your technology. Will it be able to keep pace with increased orders, more elaborate accounting methods, complicated warehouse logistics and inventory?
Here is another tidbit I found interesting: your growth can have a very significant impact on your competition. Why? Because by expanding your business you may completely change who you compete with. It may have been Mainstreet Attorneys at Law and all of a sudden it’s Smith, Gambrell & Russel ( a major Atlanta law firm). This might be an exaggeration but you get my drift.
There are four ways to grow:
- Improvements – making your products and services better, faster, more precise
- Innovation – changing your products or services, or coming up with a totally new product
- Scaling – doing more of what you are doing now, and
- Strategic acquisition (this almost never happens in a small business like ours).
To Grow or Not to Grow
To get to the meat of the decision “grow or don’t grow”, ask yourself the following questions honestly and without preconception or prejudice:
- Why should we grow?
- How will we grow?
- How much should we grow?
- How much growth can we afford?
- Do we have enough people?
- Do we have the right people?
- Do we have hiring and training processes?
- Do we have financial controls?
- Do we have quality controls?
Growth will create risks for your culture, customer experience, cash flow, supply chain, raw materials, suppliers, distribution and delivery and it will impact your financial safety net. How will you mitigate these risks?
- Do you have enough daily information to monitor the risks?
- Who will help to monitor and manage these risks?
- Do you need to pace growth?
I’ll leave you with these questions to ponder before we jump into the next segment. Let’s just say that we entrepreneurs fly by the seat of our pants more often than we care to admit. We see an opportunity and happily jump in. If it happens to be a large project that takes most or all of our resources – it can potentially kill us!
We have to become strategically ambidextrous. Tackle that new opportunity, but thoughtfully. And if your success metrics don’t pan out – change them until they do.