Choosing Not to Grow a Business

Choosing Not to Grow a Business

Look at many businesses and you’ll see one question seems to dominate all others: How they can grow. Make a given amount this year and you’ll need to do more next. In a number of countries? Better find more in which to do business. It’s the drive to grow that fuels so many acquisitions, new product introductions, and financial strategies.

The need to grow is so widely assumed that you might ask whether people who get a business degree are all required to profess allegiance to the idea before they are allowed to matriculate. And yet, not all companies choose to grow. That is because there are downsides to growth and more companies than you might realize have other things they want to achieve. Such a business has unusual challenges, and managers must take special care when planning strategy and running operations. The biggest issue executives face is understanding that unending growth is not the only possible goal of a business. Some companies might decide on any of a number of fundamental strategies instead, such as the following:

  • Expansion might require a degree of investment that would reduce profitability for an amount of time that owners might consider unacceptable.
  • Owners might enjoy a hands-on experience rather than becoming more of an overseer.
  • There could be a natural limit of goods, materials, supplies, expertise, talent, or other resources necessary to satisfy customers at a given level.
  • There could be a limit of customers in a target demographic.

In short, a company might decide that for the sake of its culture or of giving customers what the brand promises, it will avoid growth so it can continue to operate in a way that upper management finds acceptable. Even if you believe in the gospel of growth, there are lessons to take from companies that eschew it:

  1. Ultimately, you are no better or more successful than your interactions with your customers. Growth can make you forget that business essential and distract time, energy, and money from what keeps the company going.
  2. You need the proper organizational structure and philosophy to handle growth. It’s not enough to lease new locations, hire more people, and buy more inventory.
  3. Capital management becomes vital, as you’ll need to fund the growth without putting the ongoing business at risk.
  4. Rapid growth can mask problems with the business, like filling a sieve with water faster than it can leak out. But the leak still remains.
  5. Growth may run in opposition to natural forces of market maturity or saturation.
  6. Even when you want a business to grow, there are good reasons to know how to manage a company in a sustained way. The skills not only pay off when company owners want to maintain a restricted growth, but when managers want to ensure that a growth strategy is intentional, well controlled, and supportive of the underlying business.