There’s an ongoing debate in the business sector about growth and size. For some, staying small just makes sense and many business owners are willing to stay on their current trajectory.
Others, however can quickly get caught up in hype about size. The truth of the matter is that pursuing size above all else does not necessarily mean you’ll be more profitable. There are so many elements that must work together to ensure that size works for you, not against you.
Before you assume that bigger is better, it is critical to run the numbers for your business. Too often the goal is chosen because it sounds good, whether or not the economics of the business support the logic.
There is no systematic evidence to indicate that industry leaders are the most profitable or successful firms. To quote one notorious example, General Motors may have been the world’s largest car company for decades, but that didn’t prevent its descent into bankruptcy. In fact, it might be more accurate to say that General Motors was too big.
Meanwhile, BMW, small by industry standards, has a history of superior returns. Over the past decade (2000-2009), its average return on invested capital was 50 per cent higher than the industry average.
Often extraordinary success is possible when a company is simply ‘big enough’ – even just 10 per cent of the market – and they do not dominate.
As an assessment, ask yourself these questions:
These are just some the questions and areas of strategy development a company needs to consider on any path of growth – large or small.
eccoConsultants is a team of ‘real life’ business advisers to small and medium sized enterprises. The consultants have all owned and run small to medium sized companies so bring real-life experience to your team. Practical experience and advice, not theory.
Please contact Garreth Bohanes, Senior Consultant at eccoConsultants for any strategy or growth services by using this form. Garreth specialises in Sales and Business growth.