Entrepreneurs are driven to grow companies. The faster and bigger we grow, the better we get, right? If we are going to play the game, we might as well play to win, and we darn well want to win big! Growth is good. More growth is great. Exponential growth, priceless.
Or is it?
In my bestselling book titled, The Second Decision: The qualified entrepreneur, I outlined the top reasons companies either fail or underperform in the long run. Yes, you guessed it – out–of-control growth makes the list. So, let’s take a closer look.
Out-of-control growth: This would include over-expansion, moving into less-profitable markets, experiencing growing pains that damage the business, or borrowing too much money in an attempt to keep growth at a particular rate. Sometimes less is more!
In a past column, I wrote about cash as the # 1 reason why companies fail, and out-of-control growth companies are just as guilty as failing in this manner – burning up their cash until the well has indeed run dry.
I fully understand that the models for Organic growth and Private-Equity or Venture Capital backed growth differ in terms of their growth models. Regardless, if the company goes out of business due to out-of-control growth. it doesn’t matter where the money is coming from.
For this article, let’s assume we are talking about the organic growth component of your business, where you are required to operate at a profit to sustain and grow your business for the long-term.
So, what can you do? Three steps.
- First, acknowledge not all growth is good. Imagine briefing your Board of Directors on your aggressive growth plans. Would they give you their approval or send you back to adjust your plan?
- Second, have a business plan in place that forecasts your cash along with your growth. Profitable growth is great, as long as you also maintain control of your cash along the way.
- Third, remember that vision without execution is hallucination. Even the most optimistic entrepreneur can’t save their company when it runs out of cash or operates so inefficiently its quality is negatively affected to the point their customers flee for their competitors. Having a plan and executing it are the basics of any successful business!
Be smart about your growth and you can successfully compete for years to come, while staying in control!