Knowing When to Grow
“Growth is painful. Change is painful. But, nothing is as painful as staying stuck where you do not belong.”
N.R. Narayana Murphy, Co-founder of Infosys
In contrast to the period that followed the Great Recession, the recovery phase following the pandemic may seem uneven. Revenue grew for some companies, even with public health orders. Others closed their doors forever. As the economy reopens, many firms will feel the pressure to grow at a breakneck pace to keep up with demand, even though the future remains a bit uncertain and supply chains are still struggling to re-establish themselves.
Whether it’s next month or a couple of years from now, you will have to consider sustainable growth strategies. They could come in the form of a once-in-a-lifetime chance to take over a prime spot on main street, the opportunity to open an additional location, buy out a competitor, or something as simple as adding a second shift or increasing your headcount.
A well-planned, well-timed expansion can take your business to the next level. A poorly executed one can send you into a spiral of debt and, perhaps, eventual failure. The old rules don’t really apply as the economy experiences a rebound that has no historical equal. Businesses across the state, country and world are in unchartered territory.
So, how can you take that leap of faith that, in normal times, was relatively easy to do? The good news is that some of the basics haven’t changed. What has changed are some of the variables, and in this lesson, we will give you some advice from the experts on how to successfully navigate growth.
Let’s start with the basics. Any successful business will eventually see indicators that it’s time to consider a growth strategy. A line going out your door around the block every day is an obvious indication, but others may be less so.
Industry growth. As recovery continues, specific markets or industries will experience rapid, even unexpected growth. Customer patterns have changed, some significantly and permanently. Entirely new industries and opportunities have popped up, especially in the areas of cannabis, online ordering and delivery, healthcare, home maintenance and personal services. Research your existing competitive space to see how your original business model fits and what you can or need to do to not only remain competitive but relevant.
Customer demand. This is an easy one at face value. You have more business than you can handle. But a sudden spike in sales doesn’t mean overall demand has increased long term. It could be a fluke. You don’t want to expand as a knee-jerk reaction to unexpected demand. Instead, study the data to identify whether demand is transitional or part of a longer trend. To gauge demand, talk to your customers about your current offerings, new things they are looking for and why they are buying from you and not someone else.
Steady cash flow. A steady stream of profitable months is a good indication that you are on the right track and that there is not only sufficient demand but that your costs are under control to the point where you are banking money. While extra money in your bank account is a good indicator, it is not the only reason to expand. As we’ve learned during the pandemic, having sufficient cash reserves to weather a downturn is even more important than turning a profit. Having a cushion of cash on hand is a smart business strategy, pandemic or not.
Sales channels are full or overflowing. The easiest path to expansion is to close gaps in your lead generation and sales cycle. This may mean adding e-commerce to your website, improving your communications with your customers, updating your customer contact information and creating new promotions and activities that increase traffic and sales, in-store and online. When these are running on all cylinders with no more room for growth, it’s time to think seriously about new expansion strategies that may require additional resources, staffing or capital.