Planning, Startups, Stories


Tim Berry on business planning, starting and growing your business, and having a life in the meantime.

Is Your Business Either Growing or Dying? 4

True story: there were six of us at lunch together on a beautiful late spring day in 1996. We sat on an outside table in the shade and discussed the next big growth spurt. Would we take this marketing-on-steroids proposal, at a high cost? Would it work? Could we afford not to?

I’m not sure any more which of us said it:

The status quo is great. This company is fun. The team works well together. Do we really have to grow?

I liked the idea, but didn’t fully buy it. My answer:

Yes. We’re a software company. We shrink or grow. There’s no alternative.

We did take the growth pill. Sales doubled in the following three years. Today, 14 years later, I still think that basic idea, growth or die, is true. Technologies change quickly. Trends and fashions change. Operating systems and the tools in software change. You don’t stop moving. Settle in, and you’re in trouble.

But is it that simple? I’m less certain than I used to be. And not just because of this recent piece, but still, I’m fascinated by Karen Klein’s Your Perception of Business Growth Is Wrong a few days ago on the businessweek.com site. She interviews Edward Hess, entrepreneur, author, and academic, who says, point blank:

What most business people think about growth, like “grow or die” or “growth is always good,” is not supported by research.

I do have to say that I am not as influenced by the “supported by research” phrase as I’m supposed to be. I’ve seen a lot of foolish notions supported by research. So I’m not that impressed by the results of a team of interviewers talking to CEOs of 54 companies, with average revenue of $60 million. Companies with revenues of $60 million are enormous to me. They have very little to do with the 95+% of businesses that have no employees, or just a few.

What does impress me, though, are the arguments Hess makes in the Business Week interview:

growth that’s not managed properly can lead to dilution of your customer value proposition and risks to your reputation and brand. I think you should approach growth not as an assumption but as a well-thought-out decision. Understand the difficulty involved and go into it with eyes wide open, knowing that you can stop at any time.

companies don’t necessarily have to grow or die, but they must improve or die, meaning they have to continuously improve their customer value proposition or risk going out of business.

if you take on too much growth, it can overwhelm your processes, people, and controls. What we recommend is managing the pace of growth with something like a gas-pedal approach.

Smaller, privately held companies usually don’t have the financial safety net to withstand quality control issues or negative publicity or a legal downside.

All of these arguments, taken from the interview, make sense to me. So I don’t know. What do you think: grow or die? Grow or shrink? Is it different in software, the web, and other high-tech businesses?

(Illustration: 3DProfi/Shutterstock)

  • Abdul Malupande

    Growth or die,growth or shrink.Many would think swots analysis is just academic and yet it poses a real issue in the running of any business.We may discuss this topic in detail at a forum were we point at specific entities with problems of constant improvement viz The kaizen rule.

  • http://www.cubert.net Charles Robinson

    I don’t think any company selling a product can afford to stagnate. You have to grow, in some way, to remain relevant and viable. Controlling the growth and not getting overwhelmed is the secret to building strong brand loyalty. If you sacrifice any aspect of quality in order to grow the customer base you will alienate some of your earlier customers.

    Here’s an example. I live in the South, and everyone has their own secret barbeque sauce. My friend Robin started up a company to sell a sauce she had spent the last twenty years perfecting. She went on the specialty foods circuit and picked up leads from companies like Harrod’s, Dean and Deluca, and Whole Foods. She very quickly realized this was out of her league and pulled back before she did something potentially disastrous.

    Someone else I know is a personal chef and works solo four to five nights a week. A team of one only scales so far, so there is no way she can grow without hiring more people and fundamentally changing what she does. She’s happy, though, and for her at this point in her life that’s what matters.

    So I would say the “grow or die” mantra depends on a lot of factors. One of those is the field you’re in. For goods that are sold, you have to grow because there is an economy of scale you have to reach, and as your customer base grows your cost per unit falls and profits increase. This is particularly true in the digital world where there is often zero cost to distribution and packaging since the product is downloaded. That’s basic math. (And note that I did not say there is zero cost to branding, advertising or marketing.) For personal services there is a fixed limit to how many people it takes to provide the desired level of service. So you have to decide how far you want your business to grow, and be honest with the amount of control you want to give up.

  • http://www.nkolandscaping.com Abby Santos

    Our motto is “our business is growing” I really believe that business is like a living organism, if it isn’t growing, it’s dying.

  • http://www.nwcsupport.com/ Jason Dick

    I believe the term “grow” can mean a lot of different things. I prefer to think of it as evolving. I would say “evolve” as a business or die. This evolution could show itself as growth, or as improvement or simply changing to stay current with market trends.

    Either way, a company that stays static will have a difficult time being competitive while others are evolving.

    For long-term success, a business needs to strive for improvement and growth. A business that is satisfied with being static and comfortable will soon be watching from the sidelines as others willing to work toward evolution pass them by.