Growth is a given for business sustainability. If a business does not grow in some capacity, then it eventually fades away. Please don’t confuse growth with size. A company can grow, but not necessarily get substantially larger. Growth can be in terms of better customers, a better customer mix, improved products, or stronger market position. All of these contribute to more loyal customers, which translates to more sustainability.
None of them means that the business is necessarily larger.
In thinking about growth, there are stages or life cycles that practically every company experiences. These stages are not defined by time, but by the activities of the business. The life cycles are also determined to a degree by the age of the company. Understanding what stage or life cycle a company is in is important because it helps the leadership focus on the activities that will drive growth and sustainability.
The first stage is the Early Stage, often defined as the hectic, crazy, scary, stressful, “am I out of my mind” stage. The Early Stage is the beginning, and the company looks for business wherever they can find it. The goal is simple – get customers. The orientation of the early stage is selling, and sell some more, and then sell some more.
The ultimate Early Stage goal is stability – market awareness and customers who continue to buy. To reach stability, be sure to listen and be flexible in terms of products, services, and response. It’s very seldom that someone gets it right the first time. Your customers will tell you with their purchasing decisions whether you have something they value and are willing to pay for.
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Stability
If the organization listens well and responds well, the instability of Early Stage evolves to the more stable Expansion Stage of Growth. In the Expansion Stage, the company breathes a little easier, and begins to work on itself. Cash flow is positive and more predictable. Management can take some time to focus closely on the infrastructure, systems, and employees needed to not only serve the existing customers, but also serve the additional customers that most surely are on the way.
Working on oneself also improves profitability. When revenue is all that is important, the profit margin becomes secondary. The “loss leader” becomes an acceptable strategy to gain market awareness and presence. In the Expansion Stage, wean unprofitable or low profit customers to higher priced products and services, while simultaneously cutting costs by eliminating waste and poorly designed processes.
As time passes in the Expansion Stage, the growth, profitability, and sustainability hopefully continue. But, all good things eventually end. At some point in a foreseeable future, the customer base will be saturated and the ability to grow the business will slow or stall.
When this occurs, the business must transition to a new position in the market in order to continue to grow. The transition can be new products or services, new markets, new technologies, or even different industries. What’s important is to recognize that a transition is necessary. If a transition does not occur, the business will eventually begin to decline.
Common to all three stages of growth is the focus on the customer and alignment of the company with their needs. Early stage companies seek to find their place in the market and identify the customers they can best serve in a unique and valued way. Expansion companies continue to explore their customer base and find ways to improve the value equation they offer them. Companies facing a transition reinvent themselves and find new markets, or face the inevitable decline that will occur.
If company leadership understands where they are in the growth cycle of the business, and puts the customer first, they should be able to define the activities that accelerate profitable growth and sustainability.
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Ken Cook is managing director of Peer to Peer Advisors, an organization that facilitates business leaders helping each other. You can reach him at kcook@peertopeeradvisors.com.
