Reason for Seeking Growth Is the Key to Planning Strategy
Executive Roundtable is a weekly column by TEC Worldwide, an international organization of more than 7,000 business owners, company presidents and chief executives. TEC members meet in small peer groups to share their business experiences and help one another solve problems in a round-table session. The following question and answer are a summary of a discussion at a recent TEC meeting in Southern California.
Question: I own a small computer consulting services company that does about $5 million in business a year and has 25 employees. After 10 years of slow but consistent growth, I want to double revenue in the next three years. The market appears to be wide open, but I’m not sure how to go about implementing such rapid growth. Any suggestions?
Answer: The first question that comes to mind is: Why the sudden urge to double in size?
Have you grown bored with the business? Has a market opportunity suddenly presented itself? Are you looking to get big enough to acquire a competitor? Do you intend to build sales to a certain level and then cash out?
These are not rhetorical questions. The reasoning behind your desire for rapid growth will play a large role in determining how you go about it.
“Beware of growth for growth’s sake, especially when looking at 30% to 40% a year,” cautioned Bob Dabic, chief executive of DabiCoaching in Newport Beach. “Growth is a means to an end, not a goal unto itself. Unless you have a good reason for pursuing such a blistering pace and a sound strategy for getting there, you can easily cause more problems than your firm can handle.”
That said, there are many ways to go about exploring the potential for rapid growth.
Steve Driscol, president of Thermal-Vac Technology Inc. in Orange, recommended starting with some in-depth market research to determine the extent of your opportunities. In particular, take a hard look at your closest competitors and try to identify any weaknesses that you can take advantage of to increase sales. Once you have your arms around the market, bring your management team together for some serious strategic planning.
“A lot of small companies come by their growth haphazardly, which is OK as long as the growth doesn’t get out of hand,” Driscol said. However, if you intend to double your company in three years, you’d better have a road map for how to get there. That involves sitting down with the powers that be in your company and crafting a formal strategic plan that has a defined marketing strategy built into it.
“If this is your first cut at strategic planning, I’d also recommend using an outside consultant to facilitate the process. Either way, without a plan to guide you, your quest for rapid growth could easily end up in disaster.”
David La Montagne, president of Vessel Assist Assn. of America Inc. in Newport Beach, agreed that you need a strategic planning session. He also said it should include an internal analysis of your marketing processes.
“Take a look at how you currently go about acquiring new business,” he said. “Who has responsibility for bringing in new accounts and how much time do they spend doing it? Can your people and infrastructure support twice the amount of sales? If not, what capabilities and resources will you need to bring on board in order to do so?
“If your current staff is tapped out, there are several ways to expand. You can hire an outside marketing firm to drum up new business. Or you can hire more staff to service your existing accounts, thereby freeing up your ‘hunters’ to spend more time looking for new accounts. Another option might be to use telemarketing to flush out [deals with] potential customers, which your inside sales team could then close. All this assumes, of course, that you have the capital to fund these kinds of initiatives.”
Another, riskier option involves growing through acquisition. You also might consider forming alliances with companies that provide ancillary products to your market.
“There are plenty of small firms in the computer consulting industry, some of which may be ripe for acquisition,” said Karen Good, president of Irvine-based EDP Systems Inc. “Finding one that complements your strengths can give you a built-in employee base as well as a new book of business.”
At the same time, Good said, you might consider expanding your product offerings by allying with one of the big software companies. “Set yourself up as a territorial reseller or tech-support facility for them so that they not only provide leads but give you additional products to sell to existing customers.”
When all else fails, study those that have gone before you. Identify one or two companies that already have become the size you would like to be and find out how they got there. Use them as role models and sources of best practices for your own organization. If you want to become a larger company, start thinking and acting like one.
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If there is a business issue you would like addressed in this column, contact TEC at (800) 274-2367, Ext. 3177. To learn more about TEC, visit www.teconline .com.
