Growing your business

Growing is a natural process of life. Likewise, it is not only normal for a business to grow but essential. The only question is the form that that growth should take and how quickly that growth should take place. A business that does not grow, or one that grows too slowly will be overtaken by competitors and sooner or later it will collapse. Unlike natural growth, business growth must be planned for so that it takes place at levels that will enable the entrepreneurs to achieve their objectives. Many businesses do not fail at the start-up phase but rather at the growth phase mainly because of three reasons which are either:

  1. Growing too fast meaning that it runs out of cash, its management and systems fail to catch-up resulting in poor systems and poor service quality delivery which in turn leads to mass customer migration away from the business.
  2. Growing in the wrong directions through premature diversification or diversification into wrong businesses.
  3. Failing to manage the large sums of money made during growth phase. Without a clear plan of how to use the money, the entrepreneurs can become unfocused and overwhelmed with various desires leading to misuse of business funds and ultimate business failure.

Therefore, a growth plan is essential. The questions that an entrepreneur should ask himself are:

  1. Where do I want my business to get to? [vision of the destination].
  2. What steps do I need to take now to get to where I want my business to get to?
  3. What milestones do I need to achieve and what financial targets do I need to achieve at each period?
  4. What indicators of growth should I track and measure?
  5. What general growth strategy should I use; organic growth or inorganic growth?

When planning the growth of a business it is important to remember two things:

  1. That Rome was not built in a day. Deliberate small steps lead to big things. Growth is a process that requires time.
  2. The Greek mythical figure Icarus ignored Daedalus, his father’s advice not to fly too near the sun or risk melting his wings, and as a result, his wings did melt and he came crashing to his death. Hubris and impatience lead to one’s downfall.

The moral of the story is that growth is good but it must be planned, managed and allowed time to unfold rather than be catapulted at great velocity. Very fast growth is as dangerous to a business as no growth. That said, it is possible to have a sustainably fast rate of growth for a business. However, the important thing to remember for entrepreneurs that have high ambitions to grow their business fast is that such ambitions will more likely be achieved through inorganic growth of the business and secondly, that for that to happen, they will have to give up more shares of their business to outsiders. As a consequence of this, they may lose control of the business altogether to outsiders and in extreme cases may even be kicked out of their own business by new shareholders that collectively can be majority shareholders of the business and therefore, have a greater say in what happens in the business.

Business growth follows sequential steps that were identified by Churchill and Lewis [1983] that include: Existence, survival, success, take-off and resource maturity. Movement to each stage is achieved when customer demand for the business’ products has grown to such a level that pressure builds in the business to move to the next level of business growth.

Small business growth stages

While Churchill and Lewis [1983], show the growth stages that a business goes through, Ainsoff’s [1957] growth matrix shows how entrepreneurs can go about growing the business to the next stage. Ainsoff’s Model addresses the question of which path to follow in order to get the most customers that will help the business satisfy its financial goals that the entrepreneurs have set. The path that entrepreneurs choose in order to grow the business to the next level depends on the resources that are available to them,

the time within which they wish to achieve their financial targets, their capabilities to raise the money that is required and so on. Practical considerations guide entrepreneurs on the most viable path to take towards achieving the growth that they want for their business otherwise they will not be successful in achieving the growth that they expect or desire.