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Monthly Business e-Tips Vol 1
Issue 12

Are You Experiencing Growing Pains?

Though this topic is not often discussed, I want to focus on managing growth in this issue of Growing Possibilities.

I recently met with a client over coffee. While talking about the company's strategy for the future, I brought up the issue of managing growth. A patron sitting near us smiled in reaction to our conversation. We found out his MBA thesis had been on the challenge of managing growth. He was in agreement with the advice I was giving my client. His findings uncovered that a majority of companies do not attend to the risks expansion brings. His research is relevant and critical, especially since the burst of the technology bubble.

When sales are strong and revenues are up, many business owners feel a false sense of security. Their companies are growing and all seems well. What could possibly be wrong with expanding your business as much as possible? A lot can go wrong. Not that an increase of business is a bad thing, but too much too soon can end up in a disaster.

CMGI, an Andover-based company founded in 1986 as an Internet and marketing company, is a perfect example. In 1995, it began expanding as it launched @ventures the Internet venture capital arm that took its business in many directions. The company acquired and invested in many diverse technology businesses, built a huge public image and became larger than life. Its wild and unruly growth cost it and its stockholders a lot of money. The company grew too fast, in too many directions and made decisions that were not strategically solid. After losing or divesting most of its investments, CMGI is back to a more manageable and focused business.

Growth management offers a safety net ensuring sustainability. Many companies don't pay heed. During the boom, executives spent money like they were playing Monopoly. It appeared companies were doing well. In reality, the revenue had no substance behind it. Few of the high-flying companies were profitable. Businesses hired fast and furiously anticipating growth that did not come. Many spent too much on extravagant marketing tactics. The cost of doing business exceeded in-coming revenue. As in Monopoly, everyone wanted to build hotels on Boardwalk before strategically placing houses on Virginia Avenue and similar properties.

So, what can go wrong when you are growing your company? Your business could:

  • Be under-staffed
  • Have trouble delivering and supporting products and services if selling beyond capacity
  • Disappoint your customers with inconsistent quality
  • Cause strain with vendors and partners

The result could be:

  • Increased revenues but decreased profits
  • Frustrated and overworked employees who may then become difficult to retain
  • Dissatisfied customers who take their business to competitors
  • Damaged reputation
  • Going out of business

If unmanaged, growth is dangerous. It can set you up to fail. What can you do to protect your company? In business, you can work smart or be cowboy-like lassoing everything in sight.

Here are some examples of working smart:

  • Build a strong infrastructure that can support growth. A member of a CEO group I run asked for help developing a better structure for her fast growing bio-medical company. The group responded quickly using their own experiences. The CEOs suggestions included creating a better system for taking and fulfilling orders, developing a more effective sales process, a better financial tracking system and a program for retaining key employees.
  • Grow your company with appropriate financial and tax strategy in place. Be prepared, have a part-time chief financial officer help you set up financial systems and plan strategically for growth. Also, watch your working capital during the transition period. Kathy Boyce, with 25 years of finance and business experience says, "From the earliest stage of a company's development, it is critical that management have the tools to understand the impact of all decisions from a financial perspective. Cash flow, business projections and budgets as well as the establishment of the company's accounting system, policies and procedures and financial reports are all necessary tools which must be used by management to position the company for growth and expansion."
  • Developing your people into good managers and leaders is a necessity for sustainable growth. A staffing firm client plans to provide management training and coaching to help prepare employees for the new challenges that come from growth. The future success of the business is dependent on upgrading the skills of key people.

Grow your business, increase your revenue, sell more things to more people, and hire more help. Whatever you do, do it slowly and methodically. Keep your company safe and profitable. | 978-255-1767 | 25 Storey Avenue #290, Newburyport, MA 01950
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