Don't Grow for Growth Sake!

I have never really understood why so many owner-managed businesses insist on growing their businesses year on year and are made to feel like a flop if they fail to do so. There is a lot to be said for consistency, particularly in benign markets, and the management who have a solid, profitable and more importantly repeatable business year on year should take some comfort from the following story. Whilst tongue-in-cheek, I do feel it rings true:

A banker was on holiday in the Caribbean when he noticed a little fishing boat being dragged onto the beach from the sea. The banker complimented the fisherman on the quality of the fish hung on a wire and asked him how long it had taken to catch them. “Not very long”, answered the fisherman. “Why didn’t you stay out longer and catch more?” the banker asked. The fisherman explained that his small catch was enough to feed his family. “What do you do with the rest of your time”, asked the banker “I sleep late, fish a little, play with my kids and take a siesta with my wife. In the evenings I go to the village, see my friends, have a few drinks, play guitar and sing songs. I have a full and happy life”, he replied. “I am an investment banker and can help you. First start by fishing for longer every day and sell the extra fish you catch. With the extra money you can buy a bigger boat. With the extra money the bigger boat brings, buy a second and a third boat until you have an entire fishing fleet. Instead of selling your fish to the local market you can negotiate directly with a large fish processing plant or maybe even open your own plant to get access to more customers. You could then leave this little village and move to the big city and have all the trappings of a successful life.” “How long would that take?” asked the fisherman. “Between ten and fifteen years”, replied the banker. “And after that?” the fisherman enquired. “Afterwards? That’s when it gets really interesting”, answered the banker smiling. “When your business gets really big you can sell it and make millions”. “Millions? Really? And after that?" “Then you’ll be able to retire, buy an old cottage in a tiny fishing village near the coast, sleep late, play with your kids, catch a few fish, take siesta with your wife and spend evenings drinking and playing the guitar with your friends”.

An SME by its nature is a thriving enterprise with the owner being the driving force and usually the main contact with customers. When expanding the business, there will eventually be a watershed which means the owner can no longer have the personal relationships with all the customers and ultimately something is lost. Further tiers of management are then required to support the larger business which can add to costs and reduce control. Owner managers should think hard about what they are trying to achieve and what they want from their business rather than listen to the number crunchers of this world who measure success in terms of quantity rather than quality.

If you'd like to some friendly advice on your small business, we'd be more than happy to hear from you. Why not give us a call on 0845 602 9354.