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Growing Too fast? How to Slow Down but Still Generate Revenue

By: Lending Tree

 

Local Revenue vs Online Revenue

The history of American business is full of stories about explosive, ultra-fast growth. In college courses, news stories and case studies, we hear how companies like Starbucks and Lululemon expanded with breakneck speed, from small enterprises into industry-leading titans.

However, just because those stories are well-known, it doesn’t mean they’re the norm. For many companies in the early stages, it’s much easier — and, in the long run, more profitable — to slow things down. Growing too fast can leave your business scrambling, struggling to find the resources, manpower and infrastructure to meet new demands.

Take ShortStack, for example. As CNBC reported in 2016, the Las Vegas-based software company intentionally focused on slow growth in its early years, never biting off more than it could chew. The result was a multi-million dollar business that was profitable in each of its first five years — without any venture capital investment.

ShortStack, and many companies like it, succeeded by following a strategy that balanced manageable growth with wise money-making policies. This balance is replicable, and for businesses that are already expanding too quickly, it can be an essential part of ensuring longevity.

How to know when it’s time to slow down

There’s no one-size-fits-all approach to analyzing business growth, but there are a few key indicators that can help. First and foremost, it’s crucial to analyze your company’s revenue, and see where you’re spending the most money.

You can accomplish that easily with a profit-and-loss statement. This document, also referred to as an “income statement” or “P&L statement,” provides a major glimpse into the financial health of your business. These statements help track your cash flow, and can track profitability over set periods of time, in addition to bringing expenses, revenue and net profit together into one place.

These statements will also come in handy when you’re looking for small business loans, or preparing presentations to investors.

In addition to looking at numbers, it’s also important to listen. The symptoms of growing pains can show themselves everywhere — from inventory issues and increased customer complaints to low employee morale and high turnover.

The goal here is to understand where the strains of growth might be tugging on your business. Do your expenses exceed your revenues? Are your employees complaining they’re overworked? Is your inventory failing to meet demand? All of these could be signs it’s time to pump the brakes.

Potential first steps

Like so many business decisions, a slow-growth strategy is often defined by the people who implement it. Investing in talent goes a long way when slowing down — and it starts at the very top of management.

Often, that means hiring and promoting leadership that can hammer down on what your business does best, and how that strength can carry you into the future. That value system is part of what author Jim Collins refers to as the “Hedgehog Concept,” the idea that the best business leaders evaluate companies on what they can do the best, not just what’s making them money at the moment.

When you’re growing too fast, this sort of self-reflection gets harder and harder. Once a company commits to chasing profits — or, welcomes investment that does — their leaders can develop tunnel vision. But following one course of action because it makes money now doesn’t ensure longevity. Slow growth leaders prioritize longevity, and how to create a secure market advantage over competitors.

This principle funnels down to all levels. Employee satisfaction is crucial in times of slow growth: it’s essential to convince your team they’re in it for the long haul.

Examples for navigating this challenge are everywhere, but few companies have weathered it better than Bandwidth. The Raleigh, North Carolina-based company spent over 15 years in slow growth before its IPO, as Forbes reported, all while curating an environment that keeps employees happy.

The company has won awards for its corporate culture, which features a major commitment to work-life balance — including requiring employees to take their yearly PTO and a so-called “vacation embargo,” which bans staff from answering any work-related messages during their time off.

A satisfied, committed workforce can go a long way. But as you slow down growth and focus on your biggest strengths, you need to manage customer relationships the same way. Reach out to your clients. Check in. Let them know what to expect, and evaluate what they need most from you. That way, you can ensure you’re focusing on products and services that fit the biggest needs — all while setting expectations that match your new strategies.

How to keep making money

It’s important to note that growing slowly doesn’t mean losing money. In fact, when done right, it can mean the opposite.

There are plenty of ways to increase your bottom line while also slowing things down. For example, you can cut back or remove the products that are of the least help to your clientele.

After evaluating your staff and customer needs, identifying these weak points should be easy. From there, it’s all about streamlining your operations. For example, if you run a pizza chain that also sells sandwiches, but only 5% of your customers buy sandwiches, do you really need to waste the time, money and resources it takes to make them? This ideology can apply to several pain points — from real estate to inventory and more.

And while you’re focusing on employees, also consider the value of each role at your company. Could some jobs be handled by part-time workers, contractors or virtual assistants? Saving on salaries lets you trim overhead while also committing resources to the employees you need most.

Lastly, think critically about how you define success. Once you’ve accepted slower growth, you can start setting goals based on your own business — not on the market, or an investor’s wishes, or your competitors. In doing this, you can continue to be profitable while also investing in the future, letting your slow growth speed up at the right time.

Published: February 24, 2022
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Lending Tree

LendingTree is an online loan marketplace for various financial borrowing needs including auto loans, small business loans, personal loans, credit cards, and more. We also offer comparison shopping services for autos and educational programs. Together, these services serve as an ally for consumers who are looking to comparison shop among multiple businesses and professionals who will compete for their business.

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