Is Growth Always Necessary?

November 30, 2016

 

Q. There's often an assumption that growth is almost always good for small businesses. If revenue is at $500 thousand, $1 million would be better. Once you're at $1 million, $2 million is better. Does that assumption hold up? Is growth always good? 

 

A. There is an oft-repeated mantra in business, “Grow or die!” Many people subscribe to it. The problem is―it’s wrong. In conducting research for our book, Let Go to Grow; why some businesses thrive and others fail to reach their potential, we encountered numerous business owners who debunk this myth. They have successfully operated very lucrative businesses for decades, but have made conscious decisions not to grow their enterprises.

 

One small business owner explained, “My house is paid for, my cars are paid for, my river house is paid for, my boat is paid for, my jet skis are paid for, and the building that houses my business is paid for. I have no need or desire to grow my business.” We continued to push. “Won’t you need to grow your business so that you can sell it and have money for retirement?” He explained that he planned to step out of the day-to-day running of the business and let his son, an employee, take over. His son would pay rent for the building. This would provide enough retirement income. There was no need to grow the business.

 

The only potential flaw in this plan would be if his son failed to continue to operate the business successfully. When asked what he was doing to prepare his son for this role he explained, “Each year I take a longer vacation.” The comment was humorous, but it was also serious. He was grooming his son by allowing him to assume the leadership role while he was out of the office. He then coached his son regarding how to manage the enterprise. The owner was spending more and more time out of the office to allow his son to gain experience running the company, years before he would have to fly solo. Finally, we agreed. He had no need to grow his business.

 

We spoke with a concrete contractor who has revenue of about $2 million per annum. He pulls enough cash out of the company each year to make a very nice life for himself and his family. He has time for a wonderful personal life and is able to pursue some hobbies that he loves. He is highly respected in his industry. Because he is honest, trustworthy, reliable, and good at what he does, there is usually more work than he can accept. Even when times are tough, he keeps his crews busy.

 

He could grow the business significantly if he decided to do so. This would mean buying more equipment, hiring more people, working longer hours, and delegating significant decision-making authority to new managers. The owner has decided not to take that path, at least not right now. All things considered, it’s an incredibly reasonable decision.

 

During the course of our research, we interviewed many business owners who, like the ones described above, have made a conscious decision not to expand their companies any further. Growing their businesses is simply not something they wish to do and they don’t have to. Growth can certainly mean making more money. However, it can also bring with it increased risk, longer hours and more stress. In our view, it is quite reasonable for a business owner, who his happy with his/her current economic situation to forsake growth in favor of a more relaxed lifestyle. No, growth is not always necessary or good.

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