Greetings! Somewhere along the way, as entrepreneurs and CEOs we were all told that if your company isn't growing it is dying. 
Over the years I have met a few successful CEOs and business owners who have expressed to me that they have no interest or need to grow - and I am immediately tempted to remind them of the gospel truth about growth. Fortunately, I've learned the power of asking questions over expressing my beliefs (no matter how strongly I feel them to be true), and discovered some interesting things from the resulting conversations. First is that we must define growth before jumping to conclusions. Certainly growth can be defined in many ways - and doesn't necessarily mean increasing the number of employees, business locations or even revenue. Lean growth can be the result of things like innovation, optimization and evolution in a market. Not wanting or needing to get larger is entirely different than stagnating. Let's bust the misconception that growth must mean getting larger. I have worked with several highly successful companies who have discovered that by reducing their top line revenue and shrinking their overhead, they have been able to drive substantially larger profits to the bottom line. And bottom line growth is ultimately all that really matters. But as much as that is true - there are also countless horror stories of companies that have pursued enormously tantalizing opportunities and found themselves in deep trouble. I know, because I was CEO of a company that did just that and learned the hard way about the fundamentals of Fiscal Leadership. Growth for growth's sake is not supported by any strategy and is almost never a good idea. There is a fundamental difference between "good" growth and "bad" growth - and it's the latter that catches otherwise profitable companies by surprise and sometimes hurling them rapidly into throws of bankruptcy. When we imagine the benefits of robust growth, we're imaging growth that is sustainable and manageable. There are several underlying issues that tend to get in the way of good growth. The biggest by far is cash flow, and not tracking how much cash capital is consumed by growth under almost any circumstances. Many CEOs are surprised to learn that rapid growth can have a more devastating impact on cash flow than a serious downturn. Other issues include how rapid growth stresses the company's operational resources including its management systems (especially financial management), staffing (which either means on boarding new employees or dramatically increasing the work load of current staff, perhaps beyond their capacity) and vendor relationships - who may be unable to supply your needs, or unwilling to extend terms to fund your growth - and may force you to turn to unproven and possibly unreliable sources. Margins easily erode with higher volumes of sales, inventories swell, collections typically slow down and extend out - and dependence on credit often becomes both more necessary and more precarious. Last and far from least is the impact on the bandwidth the company's leadership team - who typically become consumed in dealing with the unintended consequences and challenges, and can lose focus on the core business. What does Good Growth look like? Good growth is strategic and managed. Strategic means that the growth is planned and purposeful. It expands your business in directions and ways that are sustainable in terms of both market conditions and your internal resources. In other words its something you both should and can do. Most CEOs do a gut check and sense the risk in growth that their company cannot support, even when the opportunities are tempting. The tragedy is that when we do a post-mortem on a company that collapsed under it's own growth rate - is when the answer to "why" the growth initiative was undertaken is simply that "we could." No one ever evaluated whether they should. The five things you need to do in order to make good decisions and drive good growth are: - Calculate your "Sustainable Growth Rate" which will tell you how fast your company can grow without the need for additional outside funding or taking on unreasonable risk.
- Assess your current Capacity Utilization. This includes both your facilities and human capital. Knowing how much headroom you have before you need to invest in additional capacity is critical to driving sustainable growth.
- Stress test your Operating and Management Systems - and improve them if necessary. Are your systems and your people capable of readily handling a multiple of the current workload? Or are they stretched thin now? Changing-out systems and hiring people during a rapid growth period almost always poses an enormous risk.
- Diversify and strengthen your Supply Chain. Have tested vendors in place who can handle additional volume - and serve back-up suppliers to protect you from an interruption of service or production. You must minimize any risk that taking on additional orders might reduce your ability to execute or deliver.
- Make certain there is sufficient Leadership to manage the new business without jeopardizing the base. It's critical to have the ability to steer AND know when to apply the gas or hit the breaks.
Bo Burlingham wrote a book Small Giants - Companies that Choose to Be Great Instead of Big (see below for book review). Bo interviewed scores of companies as a writer for INC Magazine and focused on fourteen that demonstrated why small and great could prevail over big and bad. I met Bo about a year ago and asked him whether the five core principles where a prescription for success - or just common factors among those who achieved success. He conceded that there are two additional factors critical to these companies succeeding. First was that they all had a strong awareness of their marketplace and were adaptive to it and secondly, all ran fiscally well-managed organizations. I tend to believe that these two factors are the common thread to sustainable success - whether that success is reached through managed growth or by deliberately remaining small. In the end it's deliberate leadership: finding that intersection of vision and reality and being consistently fiscally-minded in leading your company into the future. As always, wishing you a great and successful week ahead. 
Philip R. Liebman Managing Director, Strat4 Group Chair, Vistage International
PS - SAVE THE DATE: I will be inviting a small number of guests to attend my June 22nd Vistage meeting to participate in an expert CEO workshop led by Marc Emmer on REACHING FOR THE NEXT LEVEL: BREAKTHROUGH STRATEGIES THAT IGNITE GROWTH IN PEOPLE AND PROFIT. Please watch your email for further details- or contact me for additional information. | 
