Is Bigger Always Better in Business?

The conventional wisdom about business is that all businesses seek growth. If you’re not growing, then you’re falling behind, is how it’s usually put. But success is not always defined by growth, and many businesses can be considered highly successful even when pursuing a model of constrained growth.

Determining Individual Business Success

The major reward of business ownership may be seen, especially by non-owners, as financial. In fact, there are many reasons for running businesses other than increasing personal or firm income and wealth. For instance, a business owner may opt not to sell to customers in multiple time zones in order to facilitate regular working hours. That might limit growth, but fit into that individual business owner’s definition of success.

Entrepreneurs at a variety of stages of growth, from startup to established firm, tell researchers that factors such as freedom and independence are about as important as financial factors in motivating them to start and stay in business. One study identified a sizable list of significant motivations for business owners, including achievement, challenge, learning, recognition, status, family support, family tradition, dissatisfaction with prior employment, and community and social concerns.

Challenges of Growth

Growing too much or too fast can put at risk many of the values business owners use to define success. Financial success, for instance, can be negatively impacted if a business grows so fast that it outruns its working capital. This can lead to a cash crunch and imperil the firm’s profits and even survival.

Fast-growing firms can also outgrow their production and logistical capacity. When orders come in faster than they can be filled, due to inadequate staffing or production equipment, shipments may be late and customer service and market share can falter.

If a firm grows faster than it can add staff, existing employees can become burned out. Too-fast growth can stress vendors and suppliers as well, leading to damaging those vital relationships. If growth pressures become extreme, firms may inadequately screen new hires or accept substandard materials, resulting in lower product and service quality.

Checkpoints for Growth

An observant business owner can readily spot signs of over-growth. If a growing company’s cash receipts are flowing in more slowly than bills from vendors, for instance, that suggests growth is outstripping financial capacity and a cash-flow crunch is nearing.

When employee absenteeism rises, productivity falls and workers seem burned out, it could indicate growth is too rapid for existing staff to handle. Similarly, mushrooming equipment downtime, declining on-time performance, slumping product quality and increasing customer complaints are all potential signs of runaway growth.

Growth Solutions

Intelligent growth relies first on accurately identifying the goal and purpose of the business. If you as a business owner want to implement a profitable exit strategy as soon as possible, very rapid growth may be ideal. If you are primarily interested in maintaining a family firm that has been in the family for generations, that could argue for more restrained growth.

Once the goal is identified, systems for tracking cash flow, product quality, customer satisfaction, employee productivity and other indicators should be set up. Technology, including financial information software such as QuickBooks and customer relationship management systems such as Salesforce can be of great help in providing timely, accurate and comprehensive data to manage growth that will help you see the issue before it becomes a bigger problem.

When a growth bind is identified, solutions vary depending of the problem. For example, a cash crunch can be addressed by tightening credit standards, asking vendors for better terms or arranging an infusion of capital. If growth is stressing employees, it may be necessary to hire additional staff.

Technology often provides solutions related to staffing and productivity. Many businesses have found managed services provide economy and flexibility ideal for addressing growth management. For instance, having a managed services contract will allow a mid-sized company to use the staff of the managed services provider to offer 24/7 support to customers and in-house users without adding additional employees to cover overnights, weekends and other periods outside the normal workday.

Although business may seem to be all about growing sales and profits and market share, that is not always the case. Businesses can succeed in reaching all their organizational goals without an all-or-nothing attitude toward growth.