Business growth needs to be sustainable to be good.
In today’s business, growth is the “holy grail” for all companies. It is the most common measuring stick for success. Growth can represent a company’s arrival, increase the morale of the organization, and energize investors. With it, companies flourish. Without it, companies struggle and eventually disappear. However, there is a scenario in which a company’s growth can lead to significant challenges and potential demise. This phenomenon is called “failing at a successful rate.”
“Failing at a successful rate” is an issue to consider during growth, especially hyper-growth. In some circles, this is called “growing pains”; however, no matter the label, it is usually the result of poorly managed growth. Managing growth is a challenge that is often underestimated. Growth can create an illusion of “all is well” when in essence, the ship is taking on water. Issues, such as the following, may be happening under the radar:The cost of growth is outpacing the rate of cash flow replenishment or creating a cost structure that can only be supported at the current rate of growth. The inability to support the rate of growth is leading to concerns in areas such as customer service and operations. Growth creates a “pseudo-culture” of happiness, fun and excitement that usually evaporates as growth stalls or disappears, causing significant issues with future business decisions, company morale and employee retention.
These are only a few of the issues that are sometimes glossed over during growth, blinding a company of things to come.
As companies grow, here are some things to consider to properly manage growth:
Know your businessSpend as much time understanding what is driving growth versus supporting it. Many companies make the mistake of investing to support the current rate of growth before recognizing what’s driving it. Understand how the company acquires customers and/or creates customer loyalty for the repeat customers. Maintain focus on the core business. Don’t lose sight of how value is created, connected to customers and captured by the organization.
Focus on the numbers that matterRemember, topline revenue is the result of other metrics coming together. Know what drives those other metrics. Monitor the cost of growth and always know if it is costing the organization too much.
i. Is cash being depleted at a faster rate than being replenished?
ii. What’s the cost to acquire and support a customer?
iii. Are investments in growth building an unsupportable cost structure once the growth rate slows?
Know your organizationFocus on having the right people onboard and understand who is doing what. People issues are easily overlooked during growth. Build a culture that can endure both growth and non-growth periods.
As mentioned in the opener, growth is the “holy grail” for all businesses. With it comes success; however, the question is, will that success lead to bigger and better things or is it short term success leading to future challenges? So, if necessary, slow growth today to ensure success tomorrow and avoid the pitfalls of the “failing at a successful rate” phenomenon.
Anthony McIntosh is Founder and President of SSE Advisors, LLC, a strategic business advisory and consulting firm, focused on helping clients develop strategies to build and sustain success. You can contact Anthony at either firstname.lastname@example.org (email) or 847-668-1909 (mobile).