To grow or not to grow… Is that the small business question?
Monday, June 2, 2014
Posted by: Rhette Baughman
Every stage in the life of a business brings unique challenges, opportunities and quandaries that do not always have a clear-cut answer. One of the biggest quandaries that small business professionals face is whether to grow their business or not. I know what you’re thinking… “Why wouldn’t a business owner want their business to grow?” There are many reasons, and one of the biggest is giving up control of essential responsibilities that the small business professional owns. There is also the limiting factor that keeps all small business owners firmly grounded in reality, which is funding.
We’ve all heard the saying “if you are not growing, you’re dying.” I have always found this saying to be a bit on the dramatic and sensationalized side. I do not believe that a business should grow for the sake of growing. Growth needs to be the result of a well-planned and executed strategy. I’ve seen fast-growing businesses outgrow their cash flow and fail. On paper, these businesses are profitable, and their profit and loss statements nicely reflect it. Meanwhile, their balance sheet also reflects aging accounts receivables and increasing inventories as assets. However, cash in the bank is quickly decreasing, and that is what pays the bills. As a result, you have a business that is growing, but is on track to quickly reach its demise.
The small businesses that I find fascinating are those who are constantly pushing the envelope and wowing their customers with something new. It’s not always a new product or service, but creative ways of improving the customer experience. Many of these businesses are executing their plan, not to grow, but to maintain their current size because they have reached an apex where their profits are the highest. They might not be growing in size, but they are certainly evolving. Most of all, they are relevant to their customers, and that is what fuels their success. These businesses are running like highly tuned machines, where all the dials are set just right. Perhaps the idea of growth should be replaced with the idea of how a business evolves in order to increase its relevance. I have found that those small businesses that successfully evolve in this perpetually changing business landscape share the following characteristics:
They fight complacency. They understand that one of the biggest threats that is constantly lurking in silence, with its imminent kiss of death is complacency. It’s easy to get complacent when you and your small business finally achieve success, and predetermined milestones have been reached. When they stop feeling butterflies in their stomach, they get nervous because they know that complacency is setting in.
They know their customers very well. These businesses are laser focused on their target market, however large, small or unique it might be. They are students of their target market, constantly seeking information and learning more about them to ensure their finger is on the pulse of their needs, concerns and untapped opportunities. To them, market research does not have a finish line. I find these businesses to be the most resourceful and effective marketers.
They have the right people in the right places. I have found that these small businesses are very slow to hire, but quick to fire. They understand the importance of chemistry in a high performing team. They know the talents, gifts and weaknesses of their people, and have thoughtfully put them in the right place where their contributions will be the highest. They know what they are looking for in a new employee and will not keep a toxic “bad apple” in the bunch.
They have great systems in place. Depending on the type of business, some may have more territory to cover, but all have standards, control mechanisms and critical numbers and factors that they closely track. Knowing what to track is one thing, but having the control mechanisms in place to adjust to changes is essential. They dashboard figures; they don’t just track revenues and expenses, but also available cash for investment, their ability to borrow, forecasts, and contingency plans.
Finally, leadership and passion. These two speak for themselves, and we see them in successful businesses. I encourage you to rethink the idea “to grow, or not to grow” quandary, and consider if what your small business really needs is to evolve. Consider what qualities you share with these businesses that we all find fascinating, and if, perhaps, complacency is your biggest nemesis.
Originally posted on Inside Tucson Business. Written by Jerry Bustamante, Sr. VP, Public Policy + Southern Arizona, Arizona Small Business Association