Bigger Is Not Always Better
Posted on March 20, 2016 by Amie Devero, One of Thousands of Leadership Coaches on Noomii.
Do businesses have to grow or die? I think that history argues against it, and perhaps more importantly, so does reality.
In my practice, I talk to a fair number of founders of small and medium size businesses that have reached levels of size, revenue and scale that the owners themselves could never have anticipated when they first started. The progression from one-man shop to 2000 employee company is a slow process. But somewhere along the way a strange thing happens, the entrepreneur who once simply wanted to have a great income and a going concern that he could leave to his children, or eventually use to fund a luxurious and easy retirement, morphs into something else entirely. It becomes a sort of accelerating treadmill, with a CEO that is running to reach the next mile marker with all of his energy and focus. At that point, I am often one of the resources called in to help fuel the desired level of perpetual growth.
I’ve been reading some work by Douglas Rushkoff*, author of a new book “Throwing Rocks at Google” and numerous articles on technology and business. He believes that the corporate quest for endless, exponential growth — especially in publicly traded companies– is problematic. It got me thinking about how the quest for growth effects small business owners.
Many times, when I speak to the business owner and ask why growth is so important I will get a stock answer along the lines of “Businesses have to grow or die”. But is that true? Do businesses have to grow or die? I think that history argues against it, and perhaps more importantly, so does the reality of many solopreneurs and businesses. Also, for many business owners that try to continue growing in perpetuity, they end up miserable and over-worked, with little to show for the tremendous effort they have expended in trying to expand.
There is a significant business cost to growth. The cost is in everything it takes to scale an enterprise. For all the upside of expanding into new markets, adding jobs, reducing costs through economies of scale and so forth — the difference in culture, communication, time demands, skill-sets and so forth can sometimes overshadow the benefits of that growth. My point is simply to stop assuming that you must grow. The better question is “do you want to grow your business?” And if you do, why? Answering those two questions can open up a whole new realm that you may not have explored in the past. For some business owners or leaders, the answer is still unequivocally “Yes!” But for others, the inquiry leads to a kind of root cause analysis about the origins of the drive for growth. If the intent is to increase revenue or profit, sometimes growth isn’t the most direct strategy to get there. For example, I was speaking to a guy who helps solopreneurs like consultants, therapists and trainers grow their businesses. He pointed out something that is incredibly obvious once you think about it: You can grow your revenue enormously by doubling up your clients without selling more of your time. For example, if you are a consultant and you charge $500 an hour, perhaps there is an opportunity to consult to multiple clients simultaneously, through webinars or group coaching, or mastermind groups. Charge the same amount per hour, but charge it to a dozen people for the same hour and work with them together.
Indeed, that kind of leverage is a form of growth. But once you know your goal it changes the dynamic. When the goal was simply to grow the business, the main tactic seemed to be to sell more hours of time. Once you look beneath the growth goal, and realize that revenue is the goal, suddenly new strategies emerge. But often, there really is not a goal beneath the growth goal. I have a client who owns a fairly large business to business retail company. The company already has $75m in annual sales with profits that are around 12%. He has more personal income than he can spend, has his retirement completely funded, his children’s educations and trust funds lined up and wants for nothing. So why is he adamant to grow the company? When we had the discussion, he came to the conclusion that he really didn’t want to keep growing it. Instead, he wanted to work on client retention while determining whether his children would run it after he stops, or whether he needed to plan an exit strategy. That was a complete turnaround from his initial perspective.
So the question can be an important first step to planning your own strategy. I encourage you to ask yourself that question if you are a business owner. Dig deep and figure out your real goal. It’s a first step to designing the life you want rather than chasing a dream that you may not even have!
