Not Every Business Needs to Scale
I’ve been carefully considering the hyper growth in businesses that most modern investors expect and what kind of pressure that places on the founders who started those businesses and the leaders within those businesses. I’ve worked with many different kinds of companies – start-ups that grew big and ran profitably and happily for years, start-ups that grew too big and had to scale down, CPGs that were grossly bloated and needed to slim down to return shareholder profits, small companies that pivoted again and again until the right product/market/capital fit revealed itself.
In my 30+ years working with founders, I’ve seen a lot of companies make bad decisions because investors wanted returns that weren’t naturally possible. I’ve seen every trick to bump quarterly revenue. I’ve seen how that artificial uptick in quarterly revenue can be misconstrued (or misrepresented to investors) as sustainable. I’ve seen that artificial uptick become part of the plan for the rest of the year. I’ve seen teams struggle to meet those artificial goals. I’ve seen people lose their jobs in trying to meet those artificial goals. Goals that were never real. Goals that were never possible. Goals that — in order to be met — would require damaging whole sections of the business in perpetuity.
I see this every day with my clients: this belief that growth for growth’s sake is the move. That we must grow year over year or something is fundamentally wrong with the business. Not so! A $10M business that drains your life is not inherently better than a $2M business that you love running. Especially if the net revenue is the same!
A deeply helpful scenario I run clients through to help them shift:
Let’s take your business, as it is, and ask better questions. What is it you want out of your life and how can your business support that? Because every single business could be run twenty different ways depending on how the founder wants to live (not work).
Do you want:
To work really hard for the next five years for a huge exit?
A flexible business for the next many years while you raise your family?
A creative company you run for decades?
A small expert practice with beautiful margins?
A business that keeps you in one place or one that allows you to travel?
All of these things are possible with the same business. And they are interchangeable based on the season of life you are in. Maybe you are in grind season now and won’t be later. Maybe you have a new baby right now and you will grind when they are in elementary school. Maybe the word grind is just not at all in your vocabulary and you want to do work you love as long as you can do it in a way that makes enough money for you to live as you wish with minimal stress.
When you are in charge of the company - it is never about what the business needs and it is always about what the founder needs. How do you want to run your life and how do we re-align your business so it supports how you want to run your life?
Growth adds complexity. Staff that needs to be hired, trained, and managed. Better accounting teams. Better tax teams. Bigger marketing budgets. More paid spend. More robust customer service. Complexity nearly always means…dramatically increased expenses. If your net revenue was the same, what would you choose? Less complexity and less stress (but perhaps less growth) or more complexity, more stress, more growth?
I don’t believe there is much courage in running businesses that are chasing growth for growth’s sake. I’m far more interested in businesses that are intentional, growing naturally with their customers over time. Moving in unison with the ebbs and flows of the market, of trends, of the seasons. Moving in unison with the ebbs and flows of who the founder is and who they are becoming in each season of their life.
A restaurant owner client of mine has it right: she has a thriving tapas restaurant that she opened 20 years ago. Her restaurant has seasons where business is slow and she not only plans for it, she relishes it. The summer and winter are her time to close the restaurant and travel the world with her family. When she buys wine from her reps, she knows exactly what she can spend and doesn’t go over, even as her love of fine French wine has only increased with all her travel. As she likes to say: “I have my expenses dialed. I know exactly what I make when the restaurant is open and I know how to keep costs steady so it’s always enough to pay myself and staff.”
She has resisted the calls to open more locations. To expand the size of her space. To add more programming, more menu options, more events to lift business during off-peak times. She makes enough money to have a beautiful home in a community she loves, put her girls through college, and take a few trips each year to far flung places. Could she make more if she expanded? Yes. Would she work a lot more hours if she expanded? Yes. Is she interested in taking all that on simply for the sake of more, more, more? No. She’s not. She knows who she is, she loves the business she created and she loves the life her business has allowed her to create for herself, her long-time employees and her family.
I firmly believe these are the businesses of the future. The businesses that are not built for big exits, but are built to sustain our souls and our communities. That are intentional, slow, meaningful and wise. Big profits and intentionality aren’t mutually exclusive. But I do believe artificial growth propped up month over month and year over year by yet more artificial growth is not sustainable and is not healthy for anyone involved except for investors. And if none of it is real, I’m not sure they benefit much either.
How do we build businesses that allow us to expand as humans instead of burning out beneath the weight of more, more, more?
How do we build businesses that earn enough to give owners and employees and communities greater freedom to do what inspires them?
How do we build businesses that sustain how we actually want to live?
This is the work that matters most to me now and it’s the work I help founders and entrepreneurs shift into.