May 21, 2015 Cash Flow en_US Slow and steady may not be as exciting as a rapid dash to success, but slow growth may lead to healthier companies. https://quickbooks.intuit.com/cas/dam/IMAGE/A5IY2ijIB/35545837ee3b19e445a50e8be01128ef.jpg https://quickbooks.intuit.com/r/cash-flow/how-slow-business-growth-can-help-support-a-solid-foundation How Slow Business Growth Can Help Support a Solid Foundation
Cash Flow

How Slow Business Growth Can Help Support a Solid Foundation

By QuickBooks May 21, 2015

Slow and steady may not be as exciting as a rapid dash to success, but slow growth may lead to healthier companies.

McKinsey & Company conducted research that found it is the transitions between growth phases that predict a company’s success or failure. Companies that are growing at a slow or normal clip have more time to consider their options and make wise decisions. Rapid growth may be desirable, but slow and steady does indeed seem to win the race.

Why Rapid Growth Leads to Pain, Not Gain

Edward Hess, a professor at the University of Virginia, researched 54 high-growth companies in his book Smart Growth: Building an Enduring Company By Managing the Risks of Growth. Professor Hess discovered that while entrepreneurs are right to seek growth for their companies, rapid growth can be as dangerous as too-slow growth.

Problems inherent in rapid-growth companies include:

  • Being unable to meet product or service demand and being unable to ramp up production quickly enough to meet high demand. Some firms end up issuing refunds or turning away business, which engenders ill-will.
  • Narrowed focus. As the CEO and owner of your small business, you need to balance big-picture perspective against daily tasks and problems. In rapid growth situations, people tend to focus on the immediate problems to be solved and neglect long-term strategic planning. The result is a CEO who lacks vision and misses opportunities.
  • Wrong direction. Not every opportunity is right for your company. Saying yes to everything can lead to quick cash, but these opportunities may be harmful if they don’t support your company’s strategy. Over time, too many poor decisions can weaken your firm’s brand and market position.

An Example of Slow Growth Success: Steals.com

Launched in 2008, Steals.com features daily deals on products ranging from baby care items to women’s shoes. Founders Jana Francis and Rhett Clevenger invested a scant $5,000 into the company and grew it slowly from a two-person office to 74 employees over the firm’s seven-year history.

Why is slow growth an important component of Steals’s strategy? In an article in Forbes, Francis and Clevenger state that they deliberately chose slow, steady growth to avoid heavy advertising spending and other debts common to internet startups. Because they don’t have debt to repay, there’s less pressure to generate rapid cash, and they can instead take their time choosing products and markets.

Steals.com became profitable quickly, building a strong foundation. The firm focuses on its loyal following of women customers who prefer receiving actual products instead of vouchers along the lines of competing deal sites. The result is slow, steady growth that appears to be resistant to economic shifts.

Capitalize on Slow Growth to Build a Strong Future

To build a firm future for your company, consider capitalizing on slow, steady growth:

  • Find and hire visionary thinkers who focus on long-term growth rather than short-term gains.
  • Emphasize excellent customer service. It may mean a short-term financial loss but the long-term gain of a loyal customer.
  • Deliver on time, every time, and avoid growing so fast that you cannot ship products in a timely fashion.
  • Study the market and make thoughtful moves that capitalize on a long-term, rather than short-term, view.

While most business people admire the superstars touted in the news headlines, it’s the quiet, steady workers who are building solid businesses for the future. Take your time to build a solid foundation now for steady growth later.