Business Growth: Questions worth Asking

Business Growth: Questions worth Asking

Operations | Posted by - July 29, 2013 at 5:44 pm

The world’s most successful entrepreneurs are obsessed with growing their businesses. Who wouldn’t want to boast about tripling their head count or, in the case of some technology companies, boosting revenue from $0 to $100-million in fairly short order?

What we don’t hear much about are the risks associated with growth. The fact is, it can bankrupt a business. Growth costs money and it negatively affects cash flow. A company can grow too fast or, due to a miscalculation, an owner could invest in growth that fails to materialize.

But there’s a reason entrepreneurs measure their success based on growth: it’s rewarding. And there are a number of different ways to do it. It can be organic or inorganic. You can stick to your core business or choose to diversify.

But first, you need to ask yourself why you want to grow. Are you driven by ambition, or are you fighting for market share? Take note of your answer as it will help guide your strategy.

Then you need to determine the state of your industry: growth, flat or decline.

If you are selling an innovative product or service, chances are you're in a growth market. Technology companies often fall into this bucket because they generally try to solve problems that haven’t been solved before. Facebook decided to change the way university students communicate. Cell phone businesses set out to expand the possibilities for mobile communication.

Flat industries are just as they sound. They’re neither growing nor shrinking. The same amount of product sold last year will be sold this year. The cleaning products industry is a good example. People have always needed these goods, and they will probably continue to buy them. And while there may be minor fluctuations tied to housing starts and the wider economy, the furniture sector would also fall into this category.

Declining industries record lower annual sales year over year because society no longer requires certain products or services as much as it once did. Desktop computer sales are falling because of rising demand for tablets and laptops. A smaller-scale example would be grade-school suppliers in small towns that housed the baby boomer generation, which was far larger than Gen X or Gen Y, and there are no signs of future population growth. Or a sector that sells to the public service at a time when governments are battling deficits.

Once you’ve determined why you want to grow, and the state of your industry, you can build a suitable growth strategy. I'll outline how to do that in my next post.

About the Author:

Bill Hennessy owns two distinct, Toronto-area businesses: RoyalPak and Oxford Beach. RoyalPak manufactures and packages a range of cleaning products at a 17,000-square-foot facility. By day, Oxford Beach runs experiential marketing campaigns to help clients reach their target audiences. By night, it creates, promotes and executes events for young professionals. Bill was named one of 20 winners of the 2012 FuEL Awards, celebrating Canada's best young entrepreneurs. He has also been nominated for Toronto Event Producer of the Year. You can follow him on Twitter.

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