Grow or Go

If your journey has been anything like mine, then you will have been in the situation where you are constantly trying to balance cashflow with growth. Investing in that new piece of equipment or that employee you so desperately need in your business is sometimes just a bridge too far. Your logical mind is telling you that the new employee will not have enough work to do to justify their salary, that that new reception desk you’ve wanted (because of how it will improve your company image) might just be a luxury item, and no one has complained about it thus far. The more emotive side of your brain is telling you that you are exhausted, that you need to employ as soon as possible before you collapse, that you will use the free time, associated with this new employee, to find more work. Your emotive brain is also telling you that, although no one is complaining about the reception desk, at some level, clients (or potential clients) are making judgment calls while sitting in the reception waiting for you.

When a rugby player passes the ball to a dashing scrumhalf, 12 meters away, he should be passing the ball at a vector that will take into account the speed and distance of the running scrum half. If you pass the ball directly to where the running scrumhalf is located, at the point in time of the throw, then, by the time the ball reaches the 12 meter mark, the scrum half is long gone. If you throw it too far forward then the scrum half may not be fast enough to intercept the ball. The ball needs to be passed to the exact space in time where the scrum half will be if he runs as fast as he can.

The same can be said of entrepreneurship - if we are to be moving forward then we need to be invested a little ahead of ourselves. This gives us the room to grow. Some people call it “investing ahead of the curve”, some call it “planning for the future”, both are true. Saar Gur, a prominent investor for Charles River Ventures (USA), was quoted as saying that in his experience he has found that those entrepreneurs that have had serious failures in the past are in fact too conservative in their outlook relative to those who have not yet experienced the failures associated with technology entrepreneurship. The result is that few of the entrepreneurs, who have had large failures, ever take enough risk to produce something really significant.

Ultimately, therefore, the decision comes down to risk and reward. What is the real risk of not growing? What is the risk of not employing? Is it burnout? Is it the inability to keep pace with your industry? According to two independent researchers, Gruber and Davila, being small correlates negatively with survival rates. The survival rate of companies increases steadily with the number of employees to a point, and then starts to flatten. So, according to the academics, growing seems to be good for small businesses. But you knew that. Standing still has a sort of built-in inflation to it; every year seems to get harder and harder.

So let’s cut to the chase. I believe that one of your most powerful tools - particularly in this economic environment - to increase your survival, as an SME, is to grow. The prevailing wisdom is encouraging us to shrink and survive. I don’t think SMEs have that luxury.

This Week’s Challenge

Grow!