Before starting your small business, you worked for several companies who shared the philosophy—grow or die. The organizations and people continuously strived to increase revenue, add products, find new customers, and hire more expertise. There was no room for complacency – the business was either on its way up or sliding down. You bought into it; it was accepted practice, and it was exciting, but was it right? Should growth be pursued at all cost?
Which is Greater, the Risk or the Reward?
Determining an acceptable rate of growth should begin with risk assessment. At what point is the company detrimentally exposed by sustained growth, when does stability become stagnancy, and where is the balance?
How much is the personal cost? How much time, energy, and stress does the pursuit of growth add to the management and staff? How comfortable is the team with change?
What are the staff’s capabilities? At what point is management overloaded to the point of incompetency? How much can the current team handle? How much control is management willing to give up to add new levels of expertise?
Is there a vision for employees? Without sustained growth what path do ambitious employees have? What vision would attract talented new employees?
What is your risk tolerance? How much can you personally handle without affecting your health, family, and mental well-being?
Are you poking the bear? Is there a predominate company in your industry that may recognize your growth as an opportunity and challenge you in the market? Do they have vendor, marketing, and resource advantages, which would make it difficult to compete?
Are your eggs in one basket? Is your company limited to one customer or one product and, therefore, exposed to customer or marketplaces whims? Is the company facing a dead-end that can only be avoided through growth?
How much capital will you need for growth? What sources are available, how will it be repaid, and what is the return?
How Much is Enough?
The answer may be found by weighing the pros and cons of growth. Growth isn’t always the only or best strategy for everyone. For example, I was part of a team that doubled annual revenue from three to six million in one year. There was only one problem—we lost money. We weren’t ready for the rate of growth we experienced. The company learned from this and continued steady, managed, growth. Twenty years later they’re recognized as one of the top 25 companies in their industry. For others, satisfaction isn’t derived from growth. A friend has a small painting business he’s managed successfully for 20 years. His staff includes three employees, and his son. He’s been approached by clients to take on more, to grow, but he’s comfortable where he is. So what’s the answer? The answer is growth is good but not for everyone, not too fast, and not unmanaged. Is your business growing? How has growth affected your company?