The “G” Myth … Why Business Growth Doesn’t Come From Increasing Sales
You grow a business by increasing sales. That simple assumption is the default way most businesses operate – especially small businesses. While this thinking is almost always wrong, the real problem is that it can easily take you further from the two goals you’re probably really after, which are (1) increased profits and (2) to feel more in control of your business and your life.
There’s a more sound approach to reach those goals. It starts by remembering that building a business with solid fundamentals has a very high likelihood of attracting new customers (and keeping them), and that it almost never works the other way around. Adding sales and new customers into an unstable business will simply expose the weakness and dysfunction already there, leading to potentially disastrous results.
Next week we’ll release State of The Owner 2013 – our annual research project surveying small and midsize business. As we saw in 2012, successful owners and entrepreneurs are increasingly aware of this myth. We’re seeing an important trend – a declining emphasis on new sales tactics in favor of “deeper” organizational work. It’s a great reminder of a deep and painful pattern we encounter with many businesses – what we call the “growth paradox.”
The Growth Paradox:
1. You want to feel in control, so the business isn’t overwhelming you like it is today.
2. You assume that the way to get there is by increasing sales.
3. Whether or not your sales actually do increase, you still feel out of control.
It’s easy to see how you can stay stuck in the loop if sales don’t increase. What’s more challenging to accept – because it goes against the “sacred cow” in our business culture of increasing the top line – is that rising sales numbers are no panacea for whatever is really ailing a business.
What happens when you add higher volume sales into antiquated back-end operations and financial systems? What happens to the customer experience if you increase the customer base by even 10% in a business being run primarily with disengaged employees? It’s like pushing more water through a leaky pipe – you can easily flood the whole building.
Things start to get dropped – errors on invoices, customer issues get brushed over, everyone is stretched even further than they were yesterday. And remember, it’s not just the new customers that suffer – it’s also your loyal long-term customers, because your team can’t take care of them like they used to.
If the investments haven’t been made for the business to scale, those new customers start driving up your direct and indirect costs (which are now skyrocketing instead of scaling) and margins get squeezed. Profits start going down instead of up. And then the spotlight gets really bright – people start wondering whether you really thought all this through. Clients often come to us in exactly this moment. It’s far from the only one, but it’s one of the ways the leadership seat gets really hot.
Low sales numbers are a real cause for concern, but they are nevertheless a symptom of a deeper issue that, if it remains unaddressed, keeps the business and the owner inside the Growth Paradox.
Don’t spend all your energy looking for more sales. Direct most of it – let’s say 75% – into driving real growth by investing in the future. Take advantage of the amazing solutions out there to streamline your operations, so they’re ready. Build a culture that really cares about your customers, so they can handle whatever comes. Become a better money manager before you have more of it to manage.
There are powerful investments – some of the best of which are free – that you can make in your business that will get you closer to your goals, sooner. Sustainable growth starts with a shift in focus – from “closing” sales to cultivating them.