We saw some great economic news last week. First, it was reported that unemployment benefit applications dropped to the lowest level in six years and the US economy grew 3.6% from July through September compared with an expected rate of 2.8%. Friday provided some additional positive news when it was reported that the US economy added 203,000 jobs in November compared to 183,000 as projected. This took the official unemployment rate down to 7.0%.
I have seen some very promising results inside the trenches with my clients over the past six months. Within that context these macro-level statistics are very meaningful and frankly, very exciting. More economic activity means more opportunity for growth. However it is important for businesses to not only understand how to grow but to also understand what role growth plays within the business.
As a new small business owner growth is very important to me………to say the least. Growth is my survival. However if it is not approached and handled properly then growth can be devastating to a business. Growth doesn’t always equate with survival. In fact growth can be a killer. I’ve seen many businesses not understand both the good power and the bad power of growth. Frankly, I’ve seen too many accountants not understand the powers of growth. I can’t help but to laugh when someone says “I want to double in size”. Okay. Good. Why? What then? Many people can’t answer those two questions after making that declaration.
Amazon.com’s CEO, Jeff Bezos, was interviewed by CBS’s “60 Minutes”. He was asked to comment on the criticism that Amazon is putting small businesses out of business (book stores as an example). His answer was brilliant: “Amazon isn’t happening to book-selling, the future is happening to book-selling” and he also acknowledges that Amazon will be disrupted one day. Amazon’s growth is really about utilizing innovation to enhance the customer experience. That’s “Why”. Amazon has required the growth in revenue and goods to build more distribution centers which allowed them to reach a wider customer base more quickly. The consumer can now visit a single website for an unimaginable variety of goods and have those goods at the doorstep in two days. With their growth they have redefined the online shopping experience which used to be a long process. The return process is equally as easy. Amazon has a lot of loyal customers because of this strategy which gives it an insane stock value compared to its actual earnings (P/E Ratio of 1,391.59 vs Walmart’s 15.34). Amazon was once a small online retailer surrounded by a lot of online retailers. Growth is a powerful thing.
Growth has to have a higher purpose. Growing to be bigger is not smart business. Growing because you want people to know your name is not smart business. Growing because growth means more profit is just flat out wrong. There can be a lot of great reasons for growing but business leaders must understand how to grow. Growth can be good for the owners, employees, customers and communities. Growth can also kill quality, morale, profits and the business itself. As I consult with my clients I insist on gaining an understanding of why growth is important for their business. I insist on this because it usually takes more than just growth to achieve whatever is their real objective. Growth should never be viewed as the goal but merely a tool within a tool belt. In my experience the most successful businesses are ones that combine a commitment to high quality in everything it does as well as the well-being of their employees and communities. If you can handle growth without compromising that commitment it can be a very powerful thing for the business and all of its stakeholders.