Earlier this year I wrote in this column about headwinds and tailwinds that impact our businesses, making it difficult to predict the future while making it imperative that we continually plan and prepare. I suggested that with signs of an improving economy, it might be time to grow again. While this may seem like a ridiculous concept in some markets, the truth is that business conditions today are showing improving trends, the competition isn’t what it used to be, and most business professionals are still paralyzed by fear. What better time to start thinking about growing your business again when most of your peers are still just trying to survive or scared to make a move.
If you find yourself at this moment considering working on growth, then the obvious questions must be answered. How much growth can we handle? What kind of growth do we want? If we start growing again, can we do it while protecting our values, reputation, and profitability? Take a minute to inventory your competition over the last five years. What kind of reputation did they cultivate during the recession? What new forms of competition have risen from the recession? Can you think of anyone who was growing like crazy before the recession? Did they get caught with their pants down when the bottom fell out? Are they even still around?
During a recent discussion about growth in our business, we came to the conclusion that not growing the business when opportunity presents itself is not an option. Our people enjoy being part of a growing company that offers opportunity for advancement and personal growth. They hung in there with us for the last four years, making sacrifices and working diligently to maintain our reputation and keep us profitable. Now we owe it to everyone, including our customers, to innovate and grow where it makes sense. We also concluded that our culture and values don’t accommodate crazy, fast growth. So moderate growth is what we will set our sights on. We defined moderate as a 10 to 15 percent annual growth rate. We also insist that we maintain the profit margin as we grow. What’s the point of growing the top line revenue without putting a proportional amount on the bottom line?
It’s really a personal decision based on risk tolerance and resources when settling on a comfortable rate of growth. Understanding the dynamics of your business and having the discipline to live within your means and values may limit growth, but could help ensure long-term survival.
I recently finished reading Great by Choice, a new book by Jim Collins, the author of Good to Great. One of the concepts discussed early in the book is “The Twenty Mile March”, which describes highly disciplined people and companies that gain success by understanding and sticking to the achievement of regular milestones despite the obstacles and discomfort that inevitably occur, along with the discipline to hold back from exceeding set limits even during good conditions. I’m reminded of a practical application of this concept that I have shared in business classes for the last 20 years. I recommend that integrators never take any one single job larger than 10 percent of annual revenues on the conservative side, and 20 percent of annual revenues on the risky side. In other words, if your business does $4 million in annual revenues, never take a single job larger than $800,000, and to be somewhat conservative, limit single job size to $400,000.
Jim Collins calls this “Fanatic Discipline”, but what most business owners and managers fail to grasp is there needs to be strict lower and upper limits to business discipline. We understand and spend most of our time making sure we accomplish certain goals, no matter what it takes, but we don’t have the discipline to say no to growing too fast because we never took the time to define the upper limits. Too much growth too fast, or taking that one really big job that ends up dominating our resources at the expense of our normal operations, can be deadly to a small business, and even a large one. It’s just a matter of scale.
If it’s time once again to start growing your business, take the time to figure out the definition of your twenty mile march and have the discipline to accomplish those goals every day, every month, and every year, no matter what, while never exceeding the upper limits, even if you think the conditions warrant it.
Mike Bradley (firstname.lastname@example.org) is president of Safeguard Security and Communications, a security and communication systems integrator in Phoenix, AZ. Bradley is a past president and director on the board of the NSCA with 25 years’ experience in sales and management in the low-voltage contracting industry.
Buy Your Growth?
If business growth is what you’re after and you think that acquisition of another AV company might be an option, consider the wisdom of 20thcentury British psychoanalyst Wilfred Bion. In his work, he explored how group dynamics can make or break a work environment. When a group takes on a “fight or flight” response, such as may happen after a company is merged into the culture of another enterprise, the drive to survive pushes members of the group to rebel against the new regime.
This is why many acquisitions fail, noted Kelly McCarthy, president of Genesis Integration in Edmonton, AB, Canada. McCarthy referred to Bion’s theories when lamenting the travails of his company’s past acquisitions. “The single most difficult issue to overcome in purchasing a business is culture,” he observed.
“The problem with buying a business of any reasonable size is that it has a group culture that is entrenched, good or bad,” McCarthy elaborated. “Attempting to change that takes significantly more energy than is ever anticipated. They have done their jobs successfully (at least from their point of view) for X number of years and now here comes someone who tells them to do it differently. The first thing that is said is, ‘That’s not how we do things around here,’ or the proverbial, ‘That will never work in this city,’ or ‘I have been successful doing this for 25 years and you want me to change?’”
While Genesis’ acquisitions achieved a geographical expansion objective for the firm, from personnel standpoint, the transactions were challenging at best. Nearly 100-percent turnover occurred.
Fortunately, the company has identified a solution. “We now grow our business regionally using a joint venture model,” McCarthy said. “It allows us to have a local rainmaker (branch leader) who is highly indoctrinated in the group culture of Genesis. Although the branch will have a flavor that is representative of the rainmaker, it will still be a Genesis branch office through and through. My people and I will not have to fight with the new branch about what is core to Genesis because we have ingrained that into the rainmaker from day one.”