Most businesses want to grow. Even businesses that are started to accommodate a certain lifestyle or allow their owner to meet a personal goal or aspiration normally want to expand their sales and profits over time.
Growth doesn’t happen by chance, however. Growing a business successfully takes preparation, good management, and an awareness of the challenges involved. Growing a business can be a joy or a nightmare—trust me, I’ve seen both. There are many businesses that have started, grown prudently, and are thriving, returning to their owners just the sort of lives they had hoped for. Sadly, there are also many businesses that have done just the opposite—they’ve started, grown either too slowly or too quickly, and have failed, leaving their owners financially and emotionally drained.
Growing a business successfully takes preparation, good management, and an awareness of the challenges involved.
The key to properly preparing for growth involves appreciating the nature of growth and planning for it in a conscientious and purposeful manner.
Appreciating the nature of business growth
There are two central things to appreciate about the nature of business growth. First, not all businesses have the potential to be aggressive growth firms. The businesses that have the potential to grow the fastest over a sustained period of time are ones that solve a significant problem or have a major impact on their customers’ productivity or lives. This is why the lists of fast-growing businesses are often dominated by technology and health-care companies. These companies have the potential to make the biggest impact on their customer’s lives. This point is affirmed by comparing the frozen food industry to medical products and biotechnology. In 2007, the frozen food industry grew by 0.6 percent, while the medical products industry grew by 3.2 percent and biotechnology grew by 9.5 percent.[1] While there is nothing wrong with starting a business in frozen foods, you need to have a realistic outlook on how fast the business will likely grow. Even though an individual frozen food company may get off to a fast start, as it gets larger, its annual growth will normally start to reflect its industry’s norms.
The second thing that a business owner needs to appreciate about growth is that a business can grow too fast. Many businesses start fast and never let up, which is stressful for everyone involved. Other businesses start, grow at a measurable pace, and then experience a sudden upswing in orders and have difficulty keeping up. This scenario can transform a business with satisfied customers and employees into a chaotic workplace with people working 50+ hours a week scrabbling to push the business’s product out the door as quickly as possible. Here are some indicators that a business is growing too fast:
You have to borrow money to pay for routine operating expenses.
You have extremely tight profit margins.
You have an overstretched staff.
Your quality is slipping.
Customer complaints are up.
Your productivity is falling.
The work environment is stressful and frantic.
The way to prevent these and similar outcomes from happening is to recognize when to put the brakes on and have the courage to do it. Sometimes this means actually turning down business, which can be a hard thing to do for a business that is committed to servicing its customers in the best manner possible.
Planning for growth
You also should plan for growth. The process of writing a business plan, discussed in Truth 10, “Writing a business plan: Still as important as ever,” greatly assists in this effort. A business plan normally includes a detailed forecast of a business’s first three to five years of sales along with an operations plan that describes how the business will meet its forecasts. Even though the business will invariably change during the first three to five years, it’s good to have a plan. Many businesses periodically revise their business plans and allow them to help guide their growth-related decisions.
A business owner should also step back and measure the business’s growth plans against his or her personal goals and expectations. As mentioned in Truth 2, “The right business for you,” a decision to grow quickly will necessitate a quick pace of activity and a hectic lifestyle. Although the upside may be a more financially successful business, sacrifices will have to be made in terms of the number of hours worked and the pressures that accompany a more hectic lifestyle.
A business owner should also step back and measure the business’s growth plans against his or her personal goals and expectations.