It is always the highest hope of a CEO that the business will grow. One of our CEO rules is, “if you can’t measure success it didn’t happen!” With that in mind, there are four areas where a CEO can measure growth/success. Those areas are revenue, profit, staff or subsidiaries. The strategies to make successful growth happen fall into one of four areas also. Those areas are (1) internal, (2) mergers and acquisitions, (3) joint ventures or (4) leveraging.
Internal growth can occur through entering new markets with the existing business model. Internal growth also includes the launching of new products or services, or expanding the products and/or services the existing client base purchases. Growth through mergers and acquisitions, a topic unto itself and worthy of a separate discussion, are good strategies when you acquirer ready only. Joint ventures and leveraging (licensing, development of a network of franchise partners) is another good avenue to explore and employ growth for a business and may also be topics to discuss at some point in the future.
However, I cannot stress enough, that growth for growth’s sake is not the right approach. On the contrary, growth has to be part of the complete corporate development strategy. It has to take into account both internal resources and external forces. This strategy is necessary because there may be situations when growth is a forced reaction to changes in the external environment. This can occur when the target market grows and demands more of the business’s products or services.
True growth is more than adding something to the company – people, office space, or sales force. Adding those things mean that the company gets larger, but is it growing strategically?
A growing business should always generate value. Successful growth can be measured by the criteria of sustainability, profitability and generation of shareholder value. These are listed in their order of priority! If sustainability isn’t a defined value, like my old boss use to say, “You can’t grow into a profit.” Any attempts to grow by taking on risk that threatens sustainability, is risk not to be taken, period!
As active business owners, we live in reality and here are some of the lessons of reality. First, growth does not necessarily generate stake holder or share holder value. A look at recent developments in all major Dow or NASDAQ stock exchanges provides more than enough evidence that growth and value do not go hand in hand. Second, successful corporate growth needs continued focus on the core business. Leadership cannot fail to stay focused on what built the business, the sustainable success of the core business. Lastly, success or failure of growth isn’t related to the size of your business or the market but is really a matter of your managerial decisions.
That sounds simple, but it is not.
Stay tuned for Part 2 in next Friday’s Business Advice-
Steven Lynn is a Business Coach at Estrada Strategies in Ontario, CA and can be reached at (909) 578-7000 or email@example.com.