Not all growth is created equal

Most business owners obsess about growth. Are we growing?

If revenue is on the rise, people are generally happy. However, just because that number is going up does not mean the company is necessarily headed in the right direction. Simply looking at one number is far too simplistic – management needs to understand the underlying trends beneath the growth and how that growth is being consumed operationally. They need to assess whether current growth will lead to more growth down the road.

In short, you do not just need growth. You need smart growth. Smart growth is growth that is sustainable for the organization and that carries it toward the larger vision. The opposite is bad growth – growth that probably looks good initially but takes you down a dead end.

There are several flavors of bad growth. One is, believe it or not, growing too fast. In order for growth to be sustainable, it needs to be the right amount of business at the right time for your team. Too much too soon can drown your business and lead to poor performance and customer dissatisfaction. Then suddenly that growth comes to a screeching halt. The problem is that the organization was not prepared for quick escalation and was crushed under the weight of growth.

A second flavor of bad growth is growing in the wrong direction. When a company is scaling up, there can be a tendency to take on customers that are not the right fit, or to begin to offer products or services that do not fully align with the direction of the business.

Typically, there are three different directions in which companies grow. The first is obvious – selling an existing product or service into the known marketplace. Many companies can thrive in this space for decades, but it is ultimately limiting. There are two ways to grow beyond those limits – by offering new products to your existing market, or by offering an existing product to new markets. Whichever direction a company chooses to grow in, management should tread carefully – moving too fast into the unknown can trip up the company, even if early sales look promising.

It is not easy to identify whether your organization is growing smartly. Growth is seductive, and it is really easy to “just want more” – but it has been proven time and again that that can be dangerous.

Having a well-considered plan and a core group of strategic advisors can help a business owner stay true to the course and avoid pitfalls that bog down many companies.

Contact us at 215.441.4600 if you have questions or would like to discuss how this topic may impact your business.

Subscribe to Kreischer Miller's email newsletter

You may also like: