{"id":685,"date":"2016-01-06T10:00:43","date_gmt":"2016-01-06T10:00:43","guid":{"rendered":"http:\/\/rocksolidbizdevelopment.com\/ourblog\/?p=685"},"modified":"2025-07-01T17:20:23","modified_gmt":"2025-07-01T17:20:23","slug":"bigger-isnt-better-if-it-isnt-making-money","status":"publish","type":"post","link":"https:\/\/rocksolidbizdevelopment.com\/ourblog\/bigger-isnt-better-if-it-isnt-making-money\/","title":{"rendered":"\u201cBigger isn\u2019t better if it isn\u2019t making money.\u201d"},"content":{"rendered":"

In the life of every successful small business, there comes what the mathematicians would call an \u201cinflection point\u201d . . . it\u2019s the point on a curve where the curve changes direction.\u00a0 In a business, it\u2019s that point where an owner must decide whether to keep the business at a relatively small size, or pull out all the stops and try to see how big he or she can grow it.\u00a0 Either way, there are risks.\u00a0 If you stay small, you\u2019re at risk of being squashed, or at least marginalized, by larger competitors.\u00a0 Consider what it\u2019s like to be a friendly, neighborhood, mom and pop hardware store when Home Depot comes to town.\u00a0 On the other hand, pursuing a growth strategy carries a whole host of risks that an owner had better understand before going down that road.\u00a0 For a discussion of those risks, please continue reading below.<\/span><\/p>\n

\u201cBigger isn\u2019t better if it isn\u2019t making money.\u201d<\/strong>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 – Pat Flinn, ValueJet<\/em><\/span><\/p>\n

That\u2019s just another way of saying, \u201cGrowth for the sake of growth is a fool\u2019s errand,\u201d isn\u2019t it?\u00a0 Depending on the industry you\u2019re in and the prevailing market conditions in that industry, a growth strategy may not make much sense . . . it may be a much better decision to remain a small, profitable niche player.\u00a0 But even if the industry and the market conditions do favor a growth strategy, growth always carries risk.\u00a0 So before embarking on such a strategy, an owner should carefully consider the pitfalls and landmines that could cause him or her to fail.<\/span><\/p>\n

Below are some of the factors . . . not all, but the most common culprits . . . that cause growth-oriented companies to fail.<\/span><\/p>\n

    \n
  1. An inability to set priorities.<\/strong>\u00a0 Priorities are not organized in a logical, top\/down fashion.\u00a0 Instead, everything is a \u201ctop\u201d priority.\u00a0 When everything is a \u201ctop\u201d priority, nothing is.\u00a0 As a result, the organization becomes paralyzed in the confusion over which \u201ctop\u201d priority they should be working on.<\/li>\n
  2. A failure to stick to the strategy.<\/strong>\u00a0 At some companies, the corporate strategy is fluid as top leadership endlessly tinkers with it.\u00a0 In this situation, the organization can\u2019t support the strategy because no one (including top leadership) knows what it is.\u00a0 It\u2019s a moving target.<\/li>\n
  3. A reckless disregard for the risks.<\/strong>\u00a0 If a company has been successful and is well-capitalized, an arrogant, damn-the-torpedoes-full-speed-ahead mentality can set in.\u00a0 So it piles on overhead in the form of new people, plant, and equipment, but revenue growth can\u2019t keep up, and just like that, bank accounts are dry and the company is in trouble.<\/li>\n
  4. An inability to assimilate strategic acquisitions.<\/strong>\u00a0 Organic, internal growth can be frustratingly slow, so growth-oriented companies frequently choose to grow by acquisition.\u00a0 While their large company brethren may engage in acquisitions routinely, small company managers probably don\u2019t do enough of it to become proficient.\u00a0 As a result, they don\u2019t fully appreciate the difficulty of merging two separate cultures, compensation systems, operating procedures, IT systems, etc.<\/li>\n
  5. Operational failures.<\/strong>\u00a0 When a growth strategy is very successful from a revenue standpoint, it can outrun the ability of people, plant, and equipment to keep up.\u00a0 People become exhausted, frustrated, and may eventually quit.\u00a0 Deadlines are missed as are delivery dates.\u00a0 Customers start seeking alternative providers.<\/li>\n
  6. A cash crisis.<\/strong>\u00a0 Growth always has an impact on cash . . . the more ambitious the growth plan, the more risk that cash flow will go from positive to negative.\u00a0 This happens too often when owners try to get by on a shoestring budget, and find out too late, they can\u2019t.\u00a0 Under-funded growth strategies have sent more than one small company to the bottom.<\/li>\n
  7. A crisis in leadership.<\/strong>\u00a0 Some of the people who got us to this point are out of gas.\u00a0 They have risen to the level of their incompetence.\u00a0 As a result, our growth is stalled, and we may be experiencing the sort of operational problems mentioned in #5 above.<\/li>\n
  8. Market misalignment.<\/strong>\u00a0 In its early, smaller days, with a smaller customer base, the company\u2019s owner and managers are able to be agile, responding quickly to changing trends and customer demands.\u00a0 But as the customer base grows and customer demands become more varied and complex, the company may find it\u2019s difficult to maintain the intimate relationships it formerly enjoyed with its customers.\u00a0 As a result, the company finds it is out-of-touch with its customers\u2019 needs, and probably ill-prepared to meet those needs quickly.<\/li>\n
  9. Outgrowing the business model.<\/strong>\u00a0 While successful companies may have a deep understanding of their business model, and while they may rigorously follow it, over time, it will become outmoded.\u00a0 As customers change, competitors change, technologies change, governmental regulations change, so too must the business model change.\u00a0 As business owners frequently say, \u201cWhat we did and how we did it when we were a $5,000,000 company don\u2019t work very well now that we\u2019re a $10,000,000 company.\u201d\u00a0 Owners who fail to recognize the need to regularly review their business model, and to make appropriate changes to keep it current, will soon find their company is no longer relevant to the market it is trying to serve.<\/li>\n<\/ol>\n

    Business speaker Richard Palmer has said, \u201cMost companies grow themselves out of business.\u00a0 They either can\u2019t finance it, or they can\u2019t manage it.\u201d\u00a0 That\u2019s why 9 out of 10 small companies fail within their first three years . . . a daunting statistic.\u00a0 Still, if you\u2019re determined to get on the road to growth, and if you know where the potholes are and are prepared with plans to avoid them, you stand an excellent chance of being the 1 in 10 survivor.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

    In the life of every successful small business, there comes what the mathematicians would call an \u201cinflection point\u201d . . . it\u2019s the point on a curve where the curve changes direction.\u00a0 In a business, it\u2019s that point where an owner must decide whether to keep the business at a relatively small size, or pull<\/p>\n

    Read More\u2026<\/a><\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[103,17],"tags":[104,105],"_links":{"self":[{"href":"https:\/\/rocksolidbizdevelopment.com\/ourblog\/wp-json\/wp\/v2\/posts\/685"}],"collection":[{"href":"https:\/\/rocksolidbizdevelopment.com\/ourblog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/rocksolidbizdevelopment.com\/ourblog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/rocksolidbizdevelopment.com\/ourblog\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/rocksolidbizdevelopment.com\/ourblog\/wp-json\/wp\/v2\/comments?post=685"}],"version-history":[{"count":2,"href":"https:\/\/rocksolidbizdevelopment.com\/ourblog\/wp-json\/wp\/v2\/posts\/685\/revisions"}],"predecessor-version":[{"id":687,"href":"https:\/\/rocksolidbizdevelopment.com\/ourblog\/wp-json\/wp\/v2\/posts\/685\/revisions\/687"}],"wp:attachment":[{"href":"https:\/\/rocksolidbizdevelopment.com\/ourblog\/wp-json\/wp\/v2\/media?parent=685"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/rocksolidbizdevelopment.com\/ourblog\/wp-json\/wp\/v2\/categories?post=685"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/rocksolidbizdevelopment.com\/ourblog\/wp-json\/wp\/v2\/tags?post=685"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}