Growth to greatness: Smart growth for entrepreneurial businesses

In most cases it takes good people to grow a business, and for an entrepreneur, this means delegating and trusting others to deliver the results that will grow the firm. Hiring the right people, engaging them in the pursuit of their dreams and giving meaning to the employees who are building the business requires different skills than those needed to launch a business. Readers will learn what those skills are and how the entrepreneur can use them to achieve smart growth.

Business growth is one of the most talked about subjects in the entrepreneurial world. Unfortunately, much of that talk is based on faulty assumptions or erroneous beliefs about business growth. For the past ten years, I have been on a journey, along with some of my colleagues, trying to discover the “science” of business growth. The purpose of this article is to share with you some of what we have found.
If you think about business growth, what comes to mind? Well, growth is good; in fact, businesses either grow or die. Yes, and growth is a nice linear function that depends in large part upon a business’s strategy. And growing bigger is always better.

The four ways to grow

There are only four ways to grow a business: improvements, innovations, scaling and strategic acquisitions.

Improvement means getting better, faster and/or cheaper. Improvements are the “blocking and tackling” of business and include improving your products and services, your business processes and the customer experience. In fact, you can improve what you do in every functional area of your business.

Innovation is doing something that’s new for your business. Innovations do not have to be unique. In fact, uniqueness is unlikely. Innovation means doing something that is really new or different for your business. Most innovations occur in two ways. First, one can innovate by recombining or reconfiguring things that already exist. Second, one can innovate by transferring things from one industry to another or by copying best-of-class ideas or processes from competitors or other businesses.

The third way to grow by scaling: Scaling is how businesses grow quickly. Getting to that point is hard. This occurs successfully if and only if the entrepreneur has built the foundation has established the right people, processes and controls that permit scaling to occur without sacrificing quality or financial stability.

The fourth way to grow is by making small strategic acquisitions. Strategic acquisitions are acquisitions of new geographic markets, customer segments, products, services or capabilities that you can either scale through your existing customer base or scale your existing products through. The purpose of strategic acquisitions should be to increase the scaling possibilities for your business.

Innovations and strategic acquisitions are riskier than growing by improvements or scaling. Strategic acquisitions require due diligence, financing, and merger integration skills and capabilities that most entrepreneurial businesses do not have. Research in the public company space tells us that most acquisitions do not end up creating value for the acquirer.