By Kris Bovay

 

Fast growth can be seductive; but challenging to manage. All small business owners want growth; and fast growth sounds like it should be a good thing - something to strive for. However, it is important to control your small business growth or risk your business' future.

One of the most exciting times for small business owners is when they see their sales grow; even more exciting when those sales grow quickly. Sales are often used as a measure of business success. In reality, all business owners should use profit as a key measure of the business' success because sales growth can require a high price.

Rapid sales growth can be achieved either organically (that is, through activities internal to the business) or inorganically (that is, through activities external to the business). Organic growth typically occurs through the launch of new products or services; by expanding the geographic market; and by starting up a new business - although growth in this case can start slow and then speed up. Inorganic growth typically occurs through mergers or acquisitions.

While inorganic growth is often very fast growth - if you buy a company that's bigger than you, you've more than doubled your size - it is often expensive growth in terms of money, time and resources. Buying growth by buying a company means that you will often purchase the bad along with the good. For example, the bad can be the total cost of the acquisition; purchasing old equipment and/or inventory along with new; acquiring unhappy or high priced labor; a bad reputation; and more. The good can be acquiring the sales book, which is the company's list of customers; additional services; a larger territory; more staff, taking out a competitor; and more.

The additional considerations for buying or not to buying growth should be how challenging is it to merge the two companies and the two cultures; what synergies can be gained - if any; if the acquisition results in an over-staffing who will be laid off, how will the lay-offs be decided, who will do the lay-offs, what will be the outcome and the environment after lay-offs. Do you have enough in-house human resources support for this type of growth? If not, can you outsource to a competent individual or firm?

The difference between acquiring a company and merging with another company is usually related to either a win-lose proposition (one company is the winner, the other the loser) or a win-win proposition (both companies are motivated to merge successfully for a number of business reasons). Mergers can consume a different resource focus: ensuring that both companies, their staff, their customers and all stakeholders feel that the end result was a win-win.

In either of these inorganic growth strategies, create a checklist approach to ensure that you carefully review all the pros and the cons and weigh the rationale carefully before you move forward on the merger or acquisition path.

Organic growth is typically a slower and more manageable type of growth. However, if your business is growing through a period of fast growth, you need to manage that growth before it overtakes you.

7 Tips for Managing your Growth:

Whether you grow organically or inorganically, you need to plan for sustainable growth. Your plan needs to include how you will manage fast growth.

For more information on managing and operating your small business, visit http://www.more-for-small-business.com/ other business strategies can be found in the strategy section at http://www.more-for-small-business.com/strategy.html

Kris Bovay is the owner of Voice Marketing Inc, a business and marketing services company. Kris has 25 years of experience in leading large, medium and small businesses. Copyright 2008 Voice Marketing Inc.