Growth by Subtraction

“If a business is not growing, it’s dying.”

Is that a true statement? Plenty of really smart people think so, and it makes sense… A growing business should translate into growing profits, right? Sometimes it does. Sometimes it doesn’t. Believe it or not, many businesses can grow by doing less.

“Less is more.” 

Could a “less is more” approach work for your business? 

Business growth can occur in several ways:
•    Sales and profit
•    Employees
•    Customers
•    Expenses

As you can see, growth isn’t always a good thing. 

Hiring New Employees

More employees translates into higher payroll expenses, and it increases the potential for HR problems. Could your organization benefit from a flat structure instead of a steep pyramid? A flat structure may help you avoid new hires and additional management staff. How are your resources currently utilized? You can boost efficiencies by ensuring that employees are doing the “right job.” Eliminate or re-assign tasks or duties that may distract an employee from their essential job function. If and when you do need to hire additional resources, don’t rush the process. Employee turnover is far more time consuming than a thorough screening/hiring process.

Adding New Customers 

More customers… That’s a good thing, right? More customers may translate into more frequent sales, but those sales may not translate into higher profits. More customers can be particularly problematic for professional service providers. It’s important to analyze what the business had to do in order to gain those new customers. Have you started offering a broader range of products and services? Have you lowered your prices? There’s usually a correlation between the two. The more your business has to compete with other similar product/service offerings, the more competitive your prices will need to be. Defining your services and/or product offering (i.e. finding a niche) may lessen competition, and with fewer options, your customers are less likely to be price sensitive. 

Managing Business Expenses

Growing expenses poses a great danger to your business. Expenses do tend to increase as a business grows, but they can quickly eat away at increasing sales. Your business may flat line without you even knowing it. Evaluate new expenses carefully… Are they really necessary? Are they in proportion to your gross sales? Yes, spending more on marketing may increase sales. Better employee training may improve internal efficiencies. It is important to measure these expenses over time by tracking their impact on net income.  

Find Your Niche 

Focusing your product/service offering can help to improve its quality. Improved quality and limited competition in a niche market may translate into higher prices and increased profits. The downside of this niche approach is that growth can be slower, but the benefits are many. Moving away from an “all things to all people” approach can help you to concentrate on the things that matter most…
•    Positive company culture
•    Process improvements
•    Hiring/retaining the right people. 

Check out our resources page to learn more about our approach to strategic business planning, and/or complete our contact form to explore a working relationship. 

Jennifer Morrow