Can Business Growth Be Bad?

  • Sep 25, 2018

I was planning to write about branding today, when I came across an article in one of my trade magazines about how too much growth too fast can be as detrimental to a company as a decline in business. That struck a chord in me, since I’ve seen some of my own clients try to heading down that road and, ultimately, have to backtrack quickly or go out of business.

Every business owner or stock holder wants the business they’ve invested their money (and maybe time and energy) into to grow. Most have goals for how large the business can be before they either need to hire additional people and/or move to another location and/or open branch stores and/or have an IPO or just sell the business altogether for a nice profit.

The hard truth, however, is that growing a business too quickly, or in the wrong way, can be dangerous to the overall health of that business.

Remember what happened to one of the most trusted car manufacturers in the world a few ago? Disaster struck and they were forced to recall about 8 million vehicles as a result of which they were faced with several class-action lawsuits over manufacturing and equipment defects. The President and CEO of Toyota, Mr. Akio Toyoda, issued an apology with a sincere regret for the company’s loss of trust by its customers. Mr. Toyoda stated that the company had grown too fast in the search for ever-increasing profits; in effect, putting profit over quality control.

Businesses should grow, but they must remain sustainable while they grow. That means:

  • having a sound business plan. Put together a business plan and a strategic marketing plan that allows for growth through several channels while controlling the progress of those plans so that you don’t outpace your resources or become unable to service your current clientele.
  • not sacrificing quality control and/or customer service in the name of more profits. When people know what to expect from you in regards to quality and service, you will lose them if that declines for whatever reason. Don’t let uncontrolled growth be that reason.
  • allowing the business to grow with a mixture of organic growth (e.g. passive marketing such as word-of-mouth referrals) and forced growth (e.g. active marketing such as trade show exhibits). Organic growth is great, as it means that your products and services are speaking for themselves. Forced growth is necessary to help spread the word, but it can backfire if it is not planned and executed properly.
  • market to the quantity of prospects that you can handle when they respond. For example, if you deploy a direct marketing campaign targeted to 10,000 people all at once and 1% of them respond (average response rate for direct mail) are you ready to take 100 phone calls? Is your website able to handle that much traffic if you’ve required people to log on at 9:00 am to receive a special offer? If your phones, your website, or your staff crash and burn trying to handle the response, you are sure to lower your closure rate and may even lose some existing customers who couldn’t complete their transaction.
  • don’t actively market until you’re ready to deliver on the promises that you make. Does this really need further explanation?

Don’t think I’m saying that business growth is bad. Lev Promotions has enjoyed continuous growth over our sixteen years in business; most of it slow and steady, but with the occasional exponential growth spurts that can just happen organically.

Growth is good; just as long as it doesn’t cause an implosion on the other end.

  • Category: Business Advice
  • Tags: Lev Promotions, Rama Beerfas, business growth
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