How Scary is Strategic Growth?

By Larry Chester, President, CFO Simplified

Decision making is always fraught with fears and challenges. But when you’re looking at the growth of your company and want to figure out the ideal time to make those scalability decisions, there’s always the challenge between doing things too early and doing them too late.

Delay in making a decision may well keep you from spending money before you need to, but it also could result in your losing an opportunity. What are the things that you can delay acting on? What are the critical decisions that you need to make to assure that you are positioned for growth? How do you keep from making mistakes that cost you the opportunity to be ready when the big opportunity presents itself?

In any organization, the big strategic decisions that you need to make fall into a number of categories:

• Lead or Follow
• Space
• Staffing
• Borrowing money
• Acquisition or organic growth

Lead or Follow

It is always riskier and more expensive to be a leader, whether that be a thought leader or a technology leader. In order to be a leader, you need to invest in Research and Development, hire people with deep experience, thrust out in new areas. It doesn’t matter whether you’re developing new technology, or new products / services, it’s always more expensive and riskier than being a follower. But there is a difference between being an innovator and a low-cost provider. Each has a necessary place in any industry. The issue is which meets your corporate philosophy more? Which is the approach that is in your corporate DNA?

The former requires a greater investment in staff and development. It will likely result in swings and misses. But it will allow you to stand proudly at the top of the ladder. If that’s more important to you, then go for it! If this is you, then you must recognize the need to spend money on talent and research while you wait for the reward. You need to be in front of the pack, developing the next new thing. You can’t rest on your laurels.

If you’re a follower, then you can more easily become the low-cost provider. Once the new direction is set, you look for your planned entry point, prepare your product/service and price it lower than the competition. More likely than not, you’re shaving margins as well. But you want to enter at the right time and price. Low enough to shock the consumer into having to make a choice, but not so far as to risk profitability.

Space

This has created problems and opportunities for companies for the past three+ years. The commercial real estate market is in turmoil. People are working from home. If you’re a service company, you have an opportunity to move into a space for a fraction of pre-pandemic costs, but the right move strategically is likely to plan for even more of your employees to work remotely, and just save the money. Remember that there is a risk of loss of efficiency because of staff feeling disconnected, so you need to put activities in place that will keep staff connected, rather than isolated. Make the effort to counteract any of those feelings among your staff.

If you’re a manufacturer or wholesale distributor, you should be prepared to spend more for large open floorspace. Warehouse space is at a premium, and there are new warehouse campuses being built all over. And the pricing is at a premium. So, if you have an expansion in mind, maybe now is the time to jump into the pool, rather than waiting.

Staffing

This is a difficult staffing environment. There is a shortage of experienced staff. So, what is your solution? Maybe this is the time to take advantage of fractional staff availabilities, whether that be in Finance, Marketing, HR or Operations. Nearly every functional area has part-time experts that you can hire to serve your upcoming needs. This takes the risk out of hiring a full-time person before you’re ready, but it helps fill the need when you really need to get work done. In the past, you had to bite the bullet and dig deep for a full-time person, with full benefits. No longer. Take advantage of the interim, fractional marketplace to allow you to get your needs fulfilled at a portion of full-time cost.

Borrowing Money

Certainly, businesses need money for growth, and exponential growth needs larger amounts of cash than slow steady growth. But you don’t want to squander the opportunity to grow your business while it’s meeting its stride. Put together a plan that will tell your growth story to your bank and get an expanded line of credit before you need it. Don’t risk having your bank shut down your growth before it solidifies. If you tell an effective story to your bank, you will get the money you need without a lot of problems. Plan for that need at least 60 days before it becomes critical. Be able to explain to the bank how much you need, what you need it for, and how long you’re going to need it. Then be sure to answer the critical question — when are you going to be able to pay it back?

Growth by Acquisition or Organically

If you’re looking to grow your organization, there are only two options: Do you buy another company, or do you grow organically? In either case, you are going to need to spend money. But a purchase is going to cost you a lot more, and has greater risk attached to it. Due diligence is the key to success, along with some intense planning. You need to plan for the integration of the new company, staff, systems and customers. If done correctly, it is definitely a great move, but it takes a well-planned effort, and significant capital. Growing internally will also require money, staff and a plan, but it will be significantly less expensive, though it will take longer to reach your goal.

If you are interested in growing your business, you need to make plans in advance. Growth doesn’t happen just because you want it. Just adding staff doesn’t make it happen. Many companies have proven that just having a larger building doesn’t make the difference. It takes a coordinated effort. Effective planning to assemble the pieces of the puzzle in the correct order is key to your success. Not only skilled staff, but money and space as well are going to be required in addition to marketing and sales efforts. Putting a coordinated plan together will get you to your goal.