What do all academic courses and business night classes have in common?
The answer is “Growth“.
They all talk about growth and nothing else. They will tell you the glamour and glory of growing your business beyond your wildness dreams. They tell you the difference between “good debt vs bad debt”. And using “good debt” as a leveraged financial instrument, you can open more outlets, hire more people, market your business more aggressively, brand your business like another Starbucks, then go IPO, and retire a multi-millionaire.
It is happening now as I you read this article. It has been happening over the last 10 years in my personal observation. It is a pity that most business owners are so easily suck into such “story”.
Here, in this article, I am going to tell you that getting bigger for your business in most cases is NOT good for your business. This is something you may not like to hear from a consultant who have rescued more than 150 businesses from failures but may I suggest that you open your mind and think through this the content of this article before you make any judgement?
I hope your answer is a “Yes“.
Most business owners are built with a growth mindset. There is nothing wrong with this. But growth for the sake of growth is WRONG at least in my opinion. It is always easier to tell your peers that your business have grown bigger than smaller. It makes you proud. It feeds your ego. It makes you a hero.
However, the truth is NOT that glamorous at all. And you know it deep within yourself.
Growth comes in many forms. Growth in assets, markets, outlets, territories, and inventories etc. Most businesses DO NOT have the necessary funds to finance their growth initiatives even if those initiatives are “great” for the business. Therefore they take on more debts to fund their expansion plans. Believing these are “good” debts.
Not forgetting that the majority of businesses are in a negative profit territory and they DO NOT generate enough cash flow from their operations 10 out of 12 months annually. Therefore they think or they “conned” themselves to think that with this “expansion” their financial woes will go away. Sadly this way of think is flawed.
With any expansion, debts and expenses increase in an exponential rate while your cash flow and profit take a back seat. With any expansion, you turned your existing business into a cash eating monster regardless of the current financial state of your business. Your expenditures will always go up before your profits come in, if any.
Most business owners were too excited to see their business spread all over Singapore that they did not or choose not to see the side effects of growth. You can see this in all the F&B outlets, fashion outlets, cafes, tuition centers, enrichment centers, and gyms etc. They all share the same fate of being slaved to their banks as well as to their employees. The owners have to pay the banks, landlords, and employees FIRST before they get paid themselves if anything left. Therefore many of them would choose to wind up within 5 years from their start date. They would not see their 5th anniversary.
While many readers would argue about the many causes of business failure and yes, I agree there are many other causes. However, mindless expansion in the name of “growth” is one that I have seen in so many of my clients business since 1998.
Our corporate tagline “Empowering Growth” signify that we are Growth Consultants ourselves, however, we are only interested in the growth of profits and corporate value in our clients’ business. And very often, we would shrink our clients’ size of operations to achieve that increased level of profitability and value. We believe in debt-free businesses that generate more than enough profits for its owners and stakeholders. This has been our corporate value imparted to all our clients.
Thank you for reading this article. I can be reach here: firstname.lastname@example.org