Siren Song

Read the article in Smart Business Magazine.

Growth is seductive but shouldn’t Be pursued at any cost.

The siren song of growth seduces all entrepreneurs. In the beginning, that’s totally the name of the game. Without it, you die. However, with apologies to the lyricist Sweet, like oxygen, “You get too much you get too high, not enough and you’re gonna die.”

For the sake of discussion, I am referring to top-line growth. We can all agree growing the bottom line is why most are in business anyway. Undue concentration on growing the top line can be distracting and deceptive.

I met a “successful” business owner 35 years ago. At the time he was grossing $100 million a year. That was a huge number back then. When I was in awe and congratulating him, he told me, “Yeah, it’s great, but we’re not making any money. We need to do $110 million to make any money.” I walked away shaking my head. I doubt he made any when he reached $110 million either. Clearly, growth in and of itself was not the solution in his case.

A corollary to that is another businessman who made things for the “secret squirrel” agencies (alphabet boys) of the government and had a little company that only did $900,000 a year. I said, “That’s all well and good, but how much money can you make if you only do $900 grand?” “$600,000,” he said.

Again, I was in awe. He knew which part of his company to focus on and it wasn’t the top line.

Another example is a business friend who puts 70 percent margin to the bottom. His company is an outstanding performer, both in top and bottom-line performance.

Growing capabilities, competencies, and cultivating the right culture, are important aspects that mean a lot more to the bottom line than just growing sales. I have written about this often since it is at the core of my business beliefs. If you’re running a company to be a high performer in major business metrics, a healthy profit should be the result, not necessarily the only goal. As Sociologist William Bruce Cameron said: “Not everything that can be counted counts, and not everything that counts can be counted.”

At our company, other kinds of growth have become more important than the top line. Staying current on trends, building core competencies and capabilities, and making sure the whole team is on the same page are table stakes in today’s fast-paced business world. An example of important growth is our educational competencies. Our society does not offer factory training anymore. It is up to us to build/teach our own workforce. To compete with low-cost countries (our factory is in Cleveland), we developed expertise in robotics and automation. By increasing (growing) productivity, we hold down our direct labor costs, thus making us more competitive.

Unbridled high growth kills more companies than lack of growth – indigestion is more dangerous than starvation to an enterprise. I have experienced extremely high growth accompanied by “hair on fire” management. It’s not pretty. Slow and steady does not garner headlines, but it is more survivable. No matter how often I read the parable, the tortoise always wins the race.

Posted in: Steve's Pep Talks