You don’t have to fall into the same trap as your always-stressed, business-owner-printing-money buddies.
You can still make money, even if you make the decision to grow your business from one stage of right-size to the next. It is without exception that all the companies I have worked with “get it”.
• They make good money.
• They have exceptional people doing outstanding work.
• Their owners sleep well.
Not all started out this way. The majority already had the foundations. Everyone had the right values.
They just needed the right strategies for how to keep those values as they grew.
A great example of this—values over velocity (instead of "people over profits")—is a company I worked with that was shrinking as fast as it was growing. Like an airplane doing 80 knots into an 80 knot headwind. It was making a hell of a lot of forward progress, but gaining zero ground.
Sales were easy. The partners worked hard. They were connected to all the right people. They were growing their top line month after month. The company was a classic hockey stick. Until the day it wasn’t.
They had crossed that classic inflection point where its revenue generation exceeded its capacity—the first “Valley of Death.”
• Quality began to suffer.
• Customers started walking out the back.
• Revenue had flattened.
• Profits were being eaten up faster than that plane above was burning through its fuel.
When we started talking strategy, the owners insisted on Balance-driven Growth. The deciding factor was they didn’t want to mimic the over-driving cultures of their competitors. They didn’t want to move their company from fun to frenetic. Or worse—to furious. They loved their people and they wanted to make sure those people wouldn’t stop loving their company. Together, these goals can only be reached by "achieving the right balance between capacity, culture, and cash."
In order of operations…
• Cash: The cliché is, “revenue is vanity, profit is sanity, and cash is king.” Another is "no money, no mission.” So we first have to stop the bleeding. In this case, shrink a little size to grow a lot of profit. We strategically raised some prices. We strategically shed some customers, and also the hyper-focus on selling to the big fish over the little ones. We matched growing the number and type of customers we would work with to the capacity available to serve them...and serve them WELL!
This takes care of the first goal. We keep the people we have.
• Capacity: Like market penetration for sales, there is a market of available labor in your area. Any business that isn’t software can only grow at the rate it can grow the size and skills of its bench. By matching sales to the right-size, we again become profitable enough to generate time. We're now able to use this time to increase customers by growing the skills of our existing teams.
The company started growing again. This time, it didn’t need to spend cash or hurt profits on growing the bench too. The up-skilling reduced overall work time per client, which added capacity without having to add headcount. That famous "step-cost."
When it made sense to again make the leap, having achieved that balance allowed us add the people we wanted, and at the pace we could from the available applications and geographic people-pool. Without making everyone frenetic. Or furious.
This takes care of the second goal. We keep the people we have—happy.
• Culture: Add these two successes together and you also get the culture you need to keep offering the right home to the people you need to keep growing. Covid has changed the dynamic between employer and employee for the foreseeable future. There has been needed acompromise from both sides—employer and employee. This company understood the stakeholder shift, adjusting their prior strategies for size and for speed. Now, the company slowed its growth, but still, grew…and profitably. They had achieved a culture of sustainability. A business that could now smoothly move from one right-size to the next.
• This took care of the third goal. The partners got to build the company, make more money, and most of all—keep our values.
In its most simplistic terms. The growth of a company is always dependent on the cash we have and the capacity we can use.
How you choose to do this depends on what kind of company do you want to own?
What kind of Owner do you want to be?
Who do you want to Love your Business?