“A business must grow or die” is a familiar maxim, but is it true? While there are circumstances in which it makes sense for a company to expand its operations, there are other times when the best course — or the only choice — is to maintain the status quo.
Owners must evaluate their market, their finances, their competition and similar economic factors before they decide to grow. But they also have to take a realistic look at their own skill set and desires.
“Most people approach that question from the outside,” said Donna Fox, co-founder of Business Growth Lab. “But I’ve found the right way is to start with the business owners and their families and ask, ‘What is it that you want?’” Are they satisfied with the amount of money they’re making? Happy with the amount of time they’re spending on their business versus time spent with family and on other pursuits? Are they enjoying their work?
“You don’t have to grow if you’re really happy in all three areas,” Fox said. “If you’re getting what you want out of a business, why in the world would you change?” But if you’re lacking fulfillment in your business, growth is one option.
GROWING WITH VISION
Geoff Sullivan founded Continuum Performance Center in East Longmeadow, Mass., in 2010. His company employs only degreed coaches who provide individually designed fitness programs for subscribers.
Over the past three years, Sullivan has increased his coaching staff from three employees to eight and his subscriber list from 35 to 350. “The amount of growth that we’ve had is as fast as it could have been while still keeping in line with our service standard,” he said. “We have a high amount of individualized attention for every consumer who comes in, and that takes a lot of preparation. I can’t say with conviction that if we had grown at a higher rate, we would have been as successful at holding to our mission.”
Sullivan pays close attention to industry trends and competitors but doesn’t expand until his business can support it. Although he wanted to open a youth training program immediately, it took two years before he had a large enough staff and customer base to do it.
Before they decide on growth, Sullivan recommends that business owners carefully evaluate its impact. “Are you expanding by offering another service with your current staff, or is adding another service going to incur the cost of more staff? Will adding another layer or expanding the business create capital expenditures or change the square footage on which you have to calculate taxes or utility costs?”
It’s important to calculate both costs and profits on a year-round basis. “People are sometimes excited to think about what something can generate, but they need to think about what growth is realistically going to generate and what their costs will be,” Sullivan said.
Before they can grow, owners must be able to articulate their vision for growth. “You have to figure out what your business is going to do, who it’s going to serve and how it’s going to serve people better than anyone else,” said Julie Benezet, founder of Business Growth Consulting. For example, will your car wash offer concierge or superfast services or be the most conveniently located?
Business owners should evaluate all options, such as adding services, opening more locations, franchising or acquiring other businesses, Fox said. “The way that you grow totally depends on the business owner’s priorities and objectives and the resources that they have available to them.”
MANAGING GROWTH
When Suzi Cusack and her husband bought a vacation rental property back in 2003, they put a blueprint of the property online. When a prospective tenant placed their mouse over a room, photos of it would appear. Their rental agents liked the system and encouraged other owners to use it — and TruePlace Inc. was born.
“In the beginning, we kept growing little by little, working in our comfort area, which was vacation homes,” Cusack said. But when Washington, D.C., real estate agents familiar with TruePlace kept asking to have their home listings on the system, the Cusacks finally hired someone to handle that business for them. That was in 2006, and their service was as hot as the real estate market in D.C.
The crash of the housing market in 2008 reined in that rapid expansion. “We continued to grow, but in a more managed fashion,” Cusack said. They worked with Bruce Johnson, president of Wired to Grow, to strategically plan their growth, and in 2013 hired a business development manager who helped them create the necessary and consistent processes to enter three new markets in 2013.
“We didn’t have time to do this on our own, and that’s why we weren’t growing,” Cusack said. Although this new stage of growth is taking a little longer than anticipated — and there have been some bumps along the way — Cusack expects that TruePlace will grow to several more locations in 2014.
“If you are very entrepreneurial, if you like to see things improved and changed, then I think planning to grow and managing your growth is very feasible,” she said.
To achieve their goals, owners should identify five to seven growth accelerators (adding a new service or location, for example) that will deliver at least 5 percent growth, Johnson said. They also need to implement constraint eliminators, removing internal problems such as inadequate systems that could prevent growth.
LIMITS TO GROWTH
“Sometimes owners say they want to grow, but they’re actually making enough money, and they don’t want to work harder and don’t want to spend more money,” said Christopher DiCenso, managing partner with Growth Strategy Partners. “We call these owners comfortably stuck.”
And growth won’t solve the problems of a struggling company. If your first business in not performing well, you shouldn’t try to grow it, he added.
Growth is sometimes limited by an owner’s skill set. “Some people are going to limit growth because they don’t want to manage a bunch of people or multiple locations, or they don’t have or don’t want to acquire the capacity to lead or manage a lot of money,” Johnson said.
In these cases, owners should consider taking on other roles if they want their business to grow, he said. They can delegate responsibilities they don’t want, such as managing multiple locations, and keep those at which they excel, such as business or product development.
But Fox said it’s never a good idea for owners to relinquish control. If an owner doesn’t like the administrative side of the business, she suggests hiring a COO who manages those responsibilities while working under the owner.
PUTTING ON THE BRAKES
Sometimes growing companies need to take a break.
Fox has one client who has grown at four times its original goal. “That seems like a good thing, but their processes and people are so stretched that the company has made a decision to slow its growth rate for the next two to three years. They are doing this intentionally and consciously to enable some shoring up of processes and the addition of some new functions that the company has never had before,” she said. While there’s always some discomfort with growth, no business should grow to the point where their people and their systems are on overload, she said.
Whether businesses are growing quickly, slowly or remaining the same size, owners should keep their perspective.
“Do not get in love with the idea of growth for the sake of growth,” said Benezet. “Think what it is you really want out of your business, and then proceed shrewdly to get there.”
