So many entrepreneurs are addicted to growth for growth’s sake. Do you know why you are pursuing growth? Chasing the carrot at the end of the stick can be disastrous if you don’t know why you are doing it. You can easily put yourself in that classic cartoon scenario of the road runner where you keep running and you don’t notice you’re 10ft off the cliff, then you look down and…… sh*t!
Growing pains
The pursuit of growth really can be distracting if you don’t put it into the context of a bigger strategy or plan. Even the best in the business have run off the cliff before realizing where they were. Norm Brodsky is one of my favorite examples on how chasing the endless goal of revenue growth can be a dangerous game to the business. He explains his story in depth in the book he wrote, Street Smarts, with Bo Burlingham. Even he had to wrestle with bankruptcy in his $100 million company because he became infatuated with growth.
Norm was talented and smart enough to understand what happened during his devoted pursuit of revenue growth. However, it was not the just the rational or intellectual part of Norm that excelled him to his ultimate business legacy, it was his internal reflection on who he was and what he was chasing that allowed him to build a business that was a Small Giant and one worth writing about.
Does size really matter?
It does if you’re in business to show off to your friends on the golf course, but if you’re actually in it to succeed, then your business only needs to be the size YOU need it to be. It’s about achieving VALUE, not just revenue.
Lets take a piece from the Small Giants Community to see what really matters to some entrepreneurs…
“It’s a widely accepted axiom of business that great companies grow their revenues and profits year after year. Yet quietly, under the radar, some entrepreneurs have rejected the pressure of endless growth to focus on more satisfying business goals. Goals like being great at what they do . . . creating a great place to work . . . providing great customer service . . . making great contributions to their communities . . . and finding great ways to lead their lives”
Value vs. Revenue
Let’s use a little example. John Anderson has a $20m business and no debt. He’s got it quite good at the moment: 58 years old, comes and goes from the office when he pleases, only working about 20 hours a week and pulling $500,000 in income each year for the last 10 years. But then the growth monster strikes… OPPORTUNITY!
Because his company did unusually well last year and grew by 30%, he sets a target to increase the size of his business by 30% this year. But in order to achieve this he’s got to take a $10m loan from a bank or find a private equity partner to fund expansion within the US.
So he takes the plunge and finds an equity partner. But guess what: that partner is on at him all the time, speaking to him every day and expecting progress. That casual 20-hour week has suddenly become a 60-hour week. Even if he avoids that cliff and the company grows, was it really worth it? John now has A BOSS!
Build that value
A great way to really understand the value of your business is to consider how it might be valued by a potential buyer. Okay, we’re exit planners – we’re biased – but the size of the company is only one factor amongst many that counts when finding the ‘real’ value of a business.
The revenue myth
Chasing a revenue number is a fool’s game. Focus on transferable value. The ability to keep or sell your cash flow is what really matters. At the bare minimum make sure to make the profit you need, with the least amount of risk and effort to sustain the lifestyle you want.
Profit + lifestyle = VALUE. Simple.