The Fallacy That Business Growth Means Getting Bigger

Richard Shrapnel's 'The Fallacy That Business Growth Means Getting Bigger'.

In business when you speak about growth its generally assumed that you’re talking about more sales, more profit and just getting bigger. Of course, in some of our new technology businesses, it’s not about profit (yet) but certainly about getting bigger. But is bigger better?


Active Knowledge Questions:

How would you explain your growth focus for the next three years? What objectives are you pursuing?


Each Year Must Be Bigger

The narrative goes something like this:

‘Every year we must get bigger’ – which means more sales, more people, bigger premises and, hopefully after all that, more profit. Growth is all about size, and that means upsizing every year. And if you don’t or can’t, then you are seen as a failure. And of course, bonuses will also be tied to this agenda.

But let’s freeze frame for a moment and ask the question, ‘What are we trying to achieve through this growth and whose agenda are we pushing?’

Is it shareholders, stockbrokers, financiers, the board or senior management who are setting this agenda? And what are they hoping to achieve from it and over what time frame?

The starting point for any a growth strategy is to set the goals of the strategy for both the short and long term. To not ask and answer this question at the outset is to allow growth to be unaccountable.

The reality is that growth is far more complex than just sales and profit. And a rolling short-term focus does not deliver an enduring capital value. Business growth must be strategic. And I believe the community, as employees, customers and even shareholders, are now calling out businesses on where their business focus lies.


Many Shapes And Sizes Of Growth

Growth can and does come in many shapes and sizes and should be tailored to each unique business. Continual growth is essential for the life of any business.

Growth should reflect the change and momentum you are seeking to achieve as crafted in your strategic business plan. This movement can range from the macro to the micro, or strategic to tactical, actions.

Here’s a simple list of what growth could include:

  • Expanding the geographical reach of your business.
  • Introducing more products/services.
  • Opening more stores.
  • Closing some stores.
  • Creating more channels to market.
  • Increasing traffic and sales through your digital channels
  • More followers, more downloads, more activity
  • Improving your inventory management.
  • Streamlining your supply chain.
  • Upskilling your sales team.
  • Reducing overhead costs.
  • More considered purchasing and reduce the cost of materials.
  • Greater R&D, creativity and innovation.
  • Vertical integration.
  • Horizontal integration.
  • Creating alliances to improve your value offering.
  • Better data analytics.
  • More research of customer needs.
  • Improved lifestyles for the business’s owners.
  • Stronger leaders throughout the business.
  • Global expansion.
  • Reduced operating risk.

And I am sure you can add many more items to this list. The point being, that the list of things that can be described as ‘growth’ is almost endless.

While many of them may not immediately increase sales, they will create flow on effects with longer-term profits being one of them.

We must also recognise that growth for closely held businesses versus publicly-listed businesses will, in some respects, vary. That variance will be based on the ability to directly include personal goals into the growth agenda of a closely held business, such as an improved lifestyle for its owners. And also the fact that quarterly results and market share price are not as significant in such businesses.


An Ecosystem For Growth

Growth requires a living environment for it to thrive. But many businesses lose sight of what kills the competitiveness of a business and allow these elements to form and flourish.

A living environment requires:

  • An eye to the future where the past is not forgotten, but it is not what secures the business’s vitality. Discussions are always about the future and what exciting opportunities and possibilities exist.
  • A youthful attitude among young and old where change is just what the business does well. ‘Better every day’ is the mantra that everyone lives by.
  • A willingness to experiment. To try things which have never been done before and to try those which previously failed again.
  • The presence of evangelists, those who have a vocal passion for what you do as a business, the customers you support and the excellence of your products and services.
  • Worthy leadership at all levels of the business where humility and gratitude flourish and self-interest is never permitted.

Any growth agenda must include a focus on sustaining and strengthening the living environment within the business.


Let’s Also Not Forget About ‘Compounding’

Growth is a journey. It is a winding path where you are continually weaving your way through in fulfilment of your purpose as a business. Visions are quests where, when achieved, you pause and reset before striking out again. Your business strategy is your intended path but, as we know, a strategy is often emergent and not deliberate.

The element that is often missed and forgone is that growth is a single continuous journey that lifts the benefits of compounding to the surface.

In compounding your growth, nothing is wasted or thrown away. Your view should be to build upon every action and lesson. It’s the adage of ‘Yes I became an overnight success, it just took me ten years’. Indeed, ten years of trying different things and not giving up and building upon what has gone before.

But you can only compound your growth if you have a strategic view of where you are going, how you intend to get there and your growth plans are built upon and deliver these intents. ‘Just getting bigger’ does not support nor allow for strategic growth to create an enduring value that builds a great business.

Growth is always strategic and requires careful thought to strengthen the competitiveness of your business.

An entirely new level of performance.

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All the best in the success of your business,

Richard Shrapnel