The skills required to grow a business are different than the skills required to start a business; the challenges found in growth different than those in start-up.
Several years ago, my friend Barb
Mowat asked me to join her in a two day program devoted to business
growth. Barb spent the first day on how
to grow a business. She was, as she always
is, supportive, encouraging and left the crowd feeling great! I was responsible for the second day which we
called, The Pitfalls of Business Growth. Needless to say, my message
was quite different and a bit less supportive and encouraging. Our participants liked the balance that
growth for its own sake was often misguided, but with planning and foresight, growth is successful and rewarding!
As a part of that presentation, I
developed a model called The Growth Trap. Consider the following scenario:
An entrepreneur starts a business. She works hard and she has some success. People like her product or her service. As time passes, the business becomes more
popular. Customers become advocates ...
create a real buzz around her business.
Sales begin to grow quickly and she is ecstatic. She remembers those early days when sales
were difficult and now the orders are rolling in!
Her product popularity pushes her productive
capacity to the limit. She is barely
getting product out the door on time, or performing services for her customers
on time. She continues to work hard on sales, all the while the timeliness
service and quality begin to diminish ever so slightly. Everybody works hard and the company keeps up
with the ever growing demand. But sales
are up, so everything must be all right!
Unfortunately, as the company grows, she
needs outside financing. As her sales
grow, her inventory and outstanding accounts receivable grow with them. This creates a Working Capital crunch as her
cash flow becomes a cash trickle. She
needs another increase in her line of credit and her banker wants this thing
called a forecast her bookkeeper has no idea how to do one and a consultant
wants $5,000 to do a financial plan.
"Why don't they give me the money", she wonders with
exasperation, "After all, sales are up so everything must be all
right."
To fill the demand, she starts to hire
people. At first she is very choosy, but
as the business is growing she falls in to the 'hire and hope' method of
recruitment. At five people, it was just
like family. At twenty, it seems that
the staff is not even on the same page.
But, everything must be all right because she has just opened another
new outlet and sales are up. One day her
first hire...her right hand woman, so to speak, announces she is resigning.
If this sounds familiar, you are
in the same boat of many entrepreneurs who are growing their businesses. You are entering the growth trap... a trap
which you must manage to avoid collapsing under the weight of your own growth. Notice that that each aspect of this business grows at a different rate. The result is a company with greater sales capacity than productive capacity, financial capacity and human resources capacity. Eventually, something has to give!
The Growth Trap
 |
| The Growth Trap |
Over the next four sessions, we
will examine the effects of the four aspects of your business growing at
different rates what you have to do in your business development to actively
work on the critical business aspect and importantly, anticipate the aspect
that will next require your attention.
Growth for its own sake is dangerous ... growth with planning and intent
is rewarding and profitable
To get a free chapter of Grow
your Biz, the book Barb based on our workshop, go to http://groyourbiz.com/about/free-chapter/.
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