Is Your Business Growing Too Fast?

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How to Maintain Your Market-Share Mojo

Extremely rapid growth for a business might sound good, but it can be a mixed blessing.

Certainly, high growth yields greater returns, offering shareholders five times more than medium-growth companies, says Debora McLaughlin, CEO of The Renegade Leader Coaching and Consulting Group(www.TheRenegadeLeader.com).

Growth predicts long-term success, she says, and it matters more than margin or cost structure.

But sustaining growth is extremely difficult. For example, a business may have tremendously high growth in the start-up phase, as did the daily-deals pioneer Groupon, which had a stellar valuation of $6.4 billion in 2010.

“By 2012, Groupon had lost a mind-boggling 80 percent of its stock value since its initial public offering,” McLaughlin says. “What happened? The tech company never figured out customer retention.”

While Groupon is a prominent example, it’s certainly not the only one. Approximately 85 percent of super-growers, defined by McKinsey as companies whose growth is greater than 60 percent, are unable to maintain their growth rates, and once lost, less than a quarter were able to recapture them.

McLaughlin, author of “The Renegade Leader: 9 Success Strategies Driven Leaders Use to Ignite People, Performance & Profits,” offers tips for maintaining momentum for businesses that are experiencing high growth.

  • Define your Culture. You can’t afford not to invest the time to define the culture needed to support your strategic plan. What is the purpose of your company, its guiding values, and its top priorities? Defining the culture allows you to align senior leaders, stakeholders and investors, make faster decisions, attract top talent and engage employees.
  • Do your best to retain the right people. Often, the problem faced by fast-growing companies is that they need to hire people fast so they fill positions based on talent versus fit and attitude. Hire people who align with your culture and its values. Have the right mix of visionaries with executers.
  • Maintain the quality of your product. Whatever it may be – an online service or your town’s best muffins – exponential growth can have you running in 100 different directions. Don’t forget what got you to this point: quality. Continue to wow the customers who trusted in you at the beginning.
  • Make sure you have the money you think you have. It’s easy to confuse growth of accounts receivable for tangible, cash-based growth. If your company isn’t collecting the cash it’s due, there’s a risk of running into a cash crisis during growth. There’s nothing more valuable for an expanding business than cash.

“You want to manage your growth in a smart way,” McLaughlin says. “You want growth that easily translates to profit, which means collecting data, doing the research and challenging your business instincts. Don’t be so focused on your product or service that you fail to notice the shifting sands of your consumer demands.”

 

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