It was recently brought to my attention that a certain financial author is preaching to business owners that “slow and steady wins the race.” While there might be some truth to this it does not take into account who the business owner is and what is that business owner’s end goal. These are important factors to take into account when determining what pace is right for your Michigan business.
It should be noted that the individual delivering this message filed for bankruptcy protection and two decades later has a net worth estimated around $55 million. I am sure any business owner would like that kind of slow and steady growth.
Different Types of Business Owners
If you are a business owner that is looking to create a job for yourself, then the slow and steady approach works great. You do not take on a lot of risk. You generally control of your own destiny for years to come. The slow and steady approach is conservative and generally is sustainable for the goal you are looking to accomplish. You likely will not grow your West Michigan business into a Midwest, National or International business, but you likely will have what most consider a nice lifestyle business.
There are business owners out there that are great at growing a business or developing a product or line of products. These individuals would be going against their very nature to try and pull back on the reigns to be slow and steady. These business owners are also generally not built to run a company. They find their passion in the building and creating aspect of business. When they hit that point where they become a CEO that has to manage lots of different aspects of the business and they are not focused on just the growth side of things, they are either unhappy or they cannot transition to the CEO spot and the business suffers.
There are even some that flip businesses in a similar fashion to how some flip houses. Similar to a contractor that sees a house that he can get a good deal on because the house needs some work on it, he does some simple repairs on the house, and sells if for a profit, some see businesses in a similar light. With a little cleaning up in this area, a strategic partner here and some quick growth, a business that was in financial trouble 24 months ago suddenly is in demand for a merger or acquisition.
You Can’t Always Decide
Slow and steady would imply that you are planning for tomorrow. But in the world of business sometimes tomorrow never comes. Personal issues and market trends can dictate when you are forced to exit your business. While you are planning on growing to a certain point in 10, 20, 30 years, what happens if something comes up on year 5 or year 12 or year 21?
If you are a business owner that is looking to retire in the 10 years or less you have some serious market trends to consider. According the Inc. Magazine in 2008, an estimated 65 percent to 75 percent of the small companies in the U.S., approximately 10 million small businesses, will be put up for sale in the next 10 years. That time table has likely shifted because of economic trends but the baby boomer generation of business owners is starting to think about retirement. That is going to have a great impact on where you have to be if you are looking to sell during that time. Do you wait and grow steadily over 10 years and hope that there is still demand for your business after this wave? Or do you grow as fast as you can and try and get on the front end of the wave?
What about the market your business operates in? If you are technology company can you grow slow and steady if your business might be obsolete in 10 years? In the food industry, organic and all natural foods are big sellers right now. Is there going to be the same demand for those types of businesses in 5 to 10 years? Conservative planning and growth do not always give you the resources necessary or diversify your business enough to keep up with market trends. Sometimes you have to go as fast as you can in order to get the most value out of what you are doing.
There is a vast difference between a business that does electrical contracting and one that manufactures organic cookies. And both of those are completely different than a business that provides a product through software as a service. The owners of each of these businesses needs to know what they want and what is best when it comes to the pace of growth. Sometimes you have to strike while the iron is hot. Sometimes you need to take on risk in order to reach a broader market. Sometimes you need to slow things down.
Ultimately having a plan and having the right counsel around you can make the difference. Taking on unnecessary risk or not protecting your business is never advised. But growing your business fast does not automatically equate to your business on a path of doom. One size fits all advise is never a good idea to follow.