Growing pains

The client in question is CEO of a medium-sized business that has done well over the past few years, building up a strong position in one or two relatively limited market segments. So far so good, you might say, but this is the moment where life often starts to become much more difficult for all concerned with businesses of this kind.

Every shareholder and every senior executive wants, no, demands, constant, almost guaranteed growth, and expectations are raised all the higher when you have been successful so far. Yet taking that all-important next step, from niche leadership to long-term growth in a broader marketplace, is never an easy moment in the life of any company.

The normal pitfalls are fairly easy to spot: the best options for avoiding them are not.

What next syndrome?
So you had a good idea, you set up your company and it’s worked out well for you, so far. That original bright idea, now a few years old, has enabled you to build a good business, establish your company on a firm footing and make solid revenue. But the law of diminishing returns is now setting in and it is becoming harder to find new segments, new niches in which you can compete profitably.

This is the point where you have to answer that frequently fatal question: Now what? What do you do for your next breakthrough? How do you build on success? Does your original business idea have a natural development path? If so, can you fund it from your own resources?

If not then how will you cope? Sell your business to a company large enough to invest in your future, perhaps? Or reinvent yourself by launching a completely new idea, which can feel like starting up all over again.

The problems of getting noticed
The beauty of being small is that you are more or less invisible to many of your potential competitors. They will not spend much effort on opposing you as long as you stay beneath their line of sight. Once you become big enough to start getting noticed, all that will change.

To grow your business in a tough climate, when European and North American economies are more likely to shrink than grow, you have to expand at someone else’s expense. You will need to take business away from other companies, and they will resist this as hard as they can. In fact, they will very probably begin to target your own current revenue streams and try to take that away from you.

Many of these competitors will be larger and have greater resources than you, and that is going to present a huge challenge to any up and coming company. Young businesses depend on being able to establish themselves without significant opposition: that’s the only way to avoid being ‘strangled at birth’. Once they are old enough to make their presence felt, they can expect to be targeted and attacked with an aggression they may find difficult to handle. Under these circumstances, survival is an achievement and growth is exceptional.

Scale and scalability
Perhaps the most important reason why most companies never make the step up from SMB to real contender in a large marketplace is the difficulty of scaling up. That means being consistent in methods, quality standards and delivery as the scope of their business expands.

Growing companies at some point in their development will have to find resources to invest in new services, money to establish themselves in new geographies, bandwidth to onboard and train new people, energy to drive sales forward and the right level of resources to deliver on an increased volume of business. This problem has always existed and has always made the second stage of growth the most dangerous period in a company’s existence.

> part 2