Small Business Growth—How Fast is Too Fast?

Start small, grow fast, make a million dollars, sell, repeat. Sound good? Not so fast.

From start-up to corporate enterprise, the message is clear—grow fast. But, in an economy with unicorns starting to trip over themselves, the decision to accelerate growth has to be made cautiously.

As a business growth authority, I work closely with my clients to investigate when the time is right—or not—to make your small business a bigger business.

Knowing when to expand, and how to do it successfully, is critical to your growth plans, and maybe the survival of your business. First, let’s take a look at some signals that reveal it is not a good time to push fast expansion:

• Lots of sales, not much money: Most people believe the way to save or grow their business is to increase sales. All you need to do is bring home that next contract. Sales are great, but if you don’t have the infrastructure in place, you are not growing—you are just making more sales.
• You are a debt collector: You made more sales, but you are cash poor with a lot of sales on account. That is not growth, that is a potentially failing business.
• High expenses, low revenue: This one is easier to see. You are paying out more than you are pulling in. Scale up too fast, blow through your capital investment, and collapse. If new financing does not come through, yours is not the first start-up to become a wind-down.
• You ignore your business model: You’re doing pretty well in a niche business, have a couple of locations, and built buzz around the quality of your product and pleasant customer service. If some is good, more must be lots better. You obtain financing, sell out on your quality concept, and go big time with a chain of new locations. Your product and service reputation start to slide.
• Too much work, too little time: Although you, and key employees, work too much, you decide to gear up for growth. You are so busy that customers are complaining, and there are quality issues. But again, if you have more sales, you think you won’t have to work so hard.

Stop. These are signs of a business out of control, not one ready for growth. So how should you think about growing your business?

Steps for safe business growth

The right growth strategy for you is not the growth strategy that worked for somebody else. Though you may sell the same product, the similarity ends there. Your financial statement, goals, and history are different than the other guy or gal. That means your best move is to work individually with an advisor who knows business—and knows how to ramp up your profits.

Business growth and increasing revenue are not the same things. While you hope one leads to the other, I work with the whole picture when I talk to you about business growth. Depending on your unique goals, and spreadsheets, I might suggest steps that include:

• Segment: Are you serving the right corner of the economy? A close look at your product and your market shows whether you can further exploit your natural business niche. Looking at market segmentation means carefully understanding the type of client, or customer, you want. You are better off aiming your marketing and business development effort at a defined audience segment that wants to pay for your product, than blowing your brand budget on scattershot marketing to try and sell to the world. A refined focus on your true segment can earn you more profit.

• Service: Once you define your market, think about an additional service you can add to serve that market. Listen to your customers—what are they looking for? Where are they going after they spend money with you? Can you identify a parallel product or service that pushes your deliverables—but does not require you to start up a whole new unit? Working with a business advisor, and good market data, is a good way to approach this type of expansion.

• Partner, acquire, merge: Mergers and acquisitions are not just for big companies. Look around for other entrepreneurs who might offer a complimentary business, or service. Individually, your separate small businesses could do okay, or maybe struggle. Considering a partnership or an acquisition is a fast way toward growth and increased revenue if the fit is right, and the infrastructure merger is handled well.

Growth may look good, but not if your small business crumbles under the weight. When you are ready to expand, or looking for how to stabilize your business for growth, I hope you will contact me to talk about your best options for moving up. You can reach me at (585) 633-7563.

Yours in profit,

Bob Britton