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Is Fast Growth Always Better than Slow Growth?

Mar 10, 2008
Growth is what it is all about. Companies that do not grow do not make money. There is a direct correlation between growth and making money.

Historically growth has most often been expensive and somewhat illusory hence the willingness to accept as much growth as fast as possible.

Anyone that has ever tried to grow a stagnating business knows how hard getting any growth can be so few can resist the lure of fast growth.

But there negatives associated with fast growth. Some businesses would be better off to avoid the temptation of fast growth and instead look at steady incremental growth: incremental versus exponential.

At this point the hope would be the owner would grow incrementally with the company.

A quick self assessment of where you are and where you want to go needs to be made. From this assessment you can determine your capability for growth as well as indications for the best strategy to take.

One characteristic of fast growth companies is that they have to make decisions at an accelerated pace. Often these decisions need to be made on the spot with little information. Mistakes are not allowed.

The key indicators here are what do you have in place right now and what will you need to put in place to complete your business plan.

The critical call on decision making is what will be the reliability of the company's day to day decision making as it grows and expands.

During fast growth the status quo or "business as usual" is set aside and everything becomes stressed and strained. It is vital to your company that you have good decision making strategies and staff to carry them out.

Sooner hopefully than later you will have carefully reviewed your markets. If you markets show little opportunity there may be little chance for growth unless you diversify.

Look at your markets carefully and see if and where there are potential growth opportunities.

Growth industries are best but some declining industries offer growth opportunities as well. If your market potential is there, then proceed to customer value.

Look to what customer value you give and how that works in your competitive environment. Run that out on a timeline and attempt to anticipate your customer's future needs.

Can you create enough value to generate a profit? Again, focus on the market opportunities for growth.

As with any business venture there is risk and fast growth comes with risks. The key is to identify these risks and determine if they are acceptable.

The biggest risk for fast growers is cash flow...do your growth strategy projections keep you solvent as you grow?

On some bank loan financial projections one is required to include available cash on hand column to guarantee liquidity. This is because sales don't always mean growth and the temptation to grow quickly through financing is a trap that has caught many an unsuspecting entrepreneur off guard.

It is important to make these projections to insure the company will remain solvent and have enough cash on hand to meet daily and weekly obligations. Part of this juggling act is volume versus capacity.

Volume versus capacity is one of the trickiest juggling acts in fast growing businesses. Once you get the increased volume, can you handle it or will the quality of your product or service deteriorate making your business less competitive?

Can you meet the anticipated demand? If your sales slow, will your fixed costs be too high? Do you have to make changes in your business infrastructure and if so, what will that cost?

Employees and staffing are probably the fast growers biggest headaches. Fast growing businesses require employees that are focused and productive.

Fast growing businesses are a good deal more stressful, but also more challenging, rewarding and fun to some employees but too much work for others.

If you decide to grow quickly, assess your employees and see where each fits. You most likely will face the problem that not all employees are suited for fast growth.

Getting and keeping good employees is much more important in a fast grower...make sure your pay and benefits provide good incentives.

Growers grab for any advantage they can and technology offers a world of advantages. The idea is how to leverage technology to make your business more effective and efficient.

What are the technology costs and can your people do with technology?

The whole business attitude is different in fast-growers. There's an excitement, thrill and upbeat buzz of activity, but not for all. Do your people see growth as stress or excitement?

Even though more fast growth opportunities exist than ever before, only a relatively small percentage of businesses are in a fast growth mode.

Run multiple scenarios so you will begin to understand the peculiar dynamics of fast growth so you can see if growth is friend or foe. Fast growth may in fact be for you, but look before you leap!
About the Author
Jack Deal is the owner of Jack D. Deal Business Consulting. Related articles may be found at http://www.jddeal.com/blog/business and http://www.freeandinquiringmind.typepad.com
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