Many startup founders find immense satisfaction in surviving the first year or two; after all, the mortality rate of startups is high. But clearing the first hurdle also serves as a reminder that running a successful business is a marathon, not a sprint. What defines success moving forward? Here are three paths which any entrepreneur would be wise to consider.
Why businesses want growth
Who doesn’t want growth? You probably wouldn’t say no to a pay raise at work, a new job title and a set of tasks or responsibilities which provide more fulfilment or are more in line with your personal strengths and interests. For many businesses, the argument for growth is straightforward. A startup of 25 employees serving 100 regular clients, for example, will have a fixed ceiling of revenue. Hiring more employees allows that business to serve more clients, increasing revenue which can be reinvested in other areas – new product offerings, for example. Acquisition of other small businesses can also open up other markets and allow business to maximize economies of scale, making it well worth the logistics and effort of post-merger integration training. Growth in business is a challenge for any leader to navigate, but the benefits are undeniable.
The case for staying small
With all the benefits which growth brings to businesses, you might be surprised to find that many small business owners are nonetheless inclined to stay small instead of seeking growth. The level of involvement and effort required to achieve further growth no doubt plays a significant part in this decision, as does the new difficulty of overseeing more complex operations. But small businesses also enjoy concrete advantages, such as adaptability; for instance, it takes less investment – in terms of time and effort – to deploy new systems and train a small workforce for the skills required to handle them. Small businesses are also known for being able to provide more personalized service; this increases loyalty among existing clients which can offset missing out on the greater revenue that growth provides through adding clients.
Scaling as a third option
Growing and scaling are often used interchangeably when describing business goals, but you can actually have one without the other. In terms of scale, this means managing to bring in more revenue with a minimal increase in overhead and additional resources required to do business, such as hiring and training new employees. Successful ‘scale-ups’ can attempt to emulate Salesforce or Google, bringing added value to their services and increasing renewals while using automation, strategic outsourcing, and other methods of streamlining their processes for efficiency. Being able to scale without growth is not a well-known option, and the methods may vary across industries, but focusing on processes is a common tactic among companies that have succeeded in this area.
Even when you lay out these options and explore the merits and drawbacks of each, there are still many other considerations which could drive a business to pursue a given path forward. A strong sense of company culture among the original team members may be favorable to scaling, since bringing in a lot of new people can dilute that bond. The owner’s personal preferences may ultimately be decisive – some entrepreneurs would like to stay in a comfort zone, while others are only driven by new challenges and increasing complexity. In any case, being informed will help avoid the pitfalls of choosing one path simply for its own sake.