The upside of managed growth for a start-up
In a world where fast business growth is applauded, it is
easy to forget that it is not the norm. Not that there is anything wrong with
fast growth, but what about everyone else?
How many times have you seen companies that grow really fast and then
fall flat? I sometimes save magazine
articles, add them to my stack of things to reread, only to find them years
later when I am cleaning off my desk. (I know that I am not alone.) What is
interesting is the number of companies mentioned that are no longer around. They
had a great idea, but couldn’t survive.
There are many reasons for that, but business cessation is a whole other
topic that could go on for some time. The obvious tortoise-hare analogy aside,
there is something to be applauded about managed growth.
You may have noticed that the previous blog posts here
discuss entrepreneurs who have carefully managed the growth of their companies.
Oscar from Landau Confections emphasizes innovation in both product and
production, ensuring that the results are truly hand-crafted and original. Cristina
from Kika’s Treats was given the opportunity to accelerate growth by mass
producing her products, but didn’t want to compromise the quality. Dandelion Chocolate’s business model
specifically focuses on small batch chocolate, isolating the sources to bring
out the individual flavors hidden in each harvest. Robin at Bequet Caramels described her
strategy as focusing, “on one niche and make the best product we possibly can in
that niche. We were often asked why we
don’t make chocolates, too. The answer
has always been that our goal is to make the best caramel anyone has ever had
(period).”
These companies were chosen not because it is interesting to
try new candy, but because each demonstrates a dedication to high-quality
products. Also, each company was given
the opportunity to grow quickly, but the owners concentrated on the quality of
the product, staying true to their existing customers, and continuing the
practices that had succeeded for them. These owners decided early on what
mattered to them in the creation and development of their companies. Individually, they chose a strategy and
stayed true to the course.
Entrepreneurs are often faced with two extreme scenarios –
too few options (such as early financing) and too many options (like an
overwhelming number of potential suppliers).
Knowing ahead of time what you want your company to represent helps with
both situations. When you don’t have
many options, your dedication to your strategy can help spur you to innovate
new solutions. When too many options
exist, your knowledge of yourself and the company can help eliminate those
choices that don’t align with your long term goals. This is not to say that
sometimes compromises aren’t necessary. However,
knowing what you stand for makes decision making during these situations much
easier.
On a side note - Public companies often don’t have the
option to manage growth in these ways when shareholders and the SEC require the
optimization of shareholder wealth (aka stock prices). When your business centers on driving down
costs to increase profit, it is hard to choose the more expensive route. Some companies are expected to make
compromises that detract from the initial goal since higher quality raw
materials, labor intensive production, and higher ethical standards for
sourcing often cost more. When a company
targets the mass market who is increasingly concerned about price, executives
often believe that they do not have the option to increase prices to off-set
higher production costs. Few companies
have been able to do this. In fact, one
of the critiques of the Western business environment is just that, too much
emphasis on meeting the quarterly expectations so that the stock price doesn’t
drop.
In turn, costs are minimized to help maximize profit.
And we buy it.
So, what is the right formula? You decide.
Every dollar that you spend is your vote.
Get to know the products that you buy and who makes
them.
