How Fast Should You Grow?

How Fast Should You Grow?

Growth is the unquestioned goal of most businesses. But growth can be dangerous.

Growth is the unquestioned goal of most businesses. But growth can be dangerous: grow too quickly, and you will burn out your team and dilute your company culture and focus. Grow too slowly, and you will become stagnant and complacent.

So how do you get growth right? Publicist and writer Ed Zitron says that growth is like a campfire. Too little and you freeze. Just the right size, and you can stay warm, maybe even cook some beans. Too big: you burn down the campsite. Every day in the news, we see stories of companies igniting their tents and scorching the earth. Firing 10% of your workforce is not evidence of a healthy relationship to with growth. It is the last resort of the arsonist. 

Still, the desire to grow is innate. Most of us seek to develop, learn new skills and experience new things. In a low-growth environment, these opportunities are few and far between. Even at work, people seek purpose and transformation. If you’re looking to retain and excite your team, you’ll likely find that growth is an easy way to create the conditions for learning.

So how do you get growth right?

Good growth requires understanding why you need to grow, what pace to target and how to achieve that pace sustainably.

Why grow?

The most common justification for growth is that it will increase the value of a company’s equity, making everyone involved wealthier. That is only half the story, though; rarely is the financial picture that clear. Because growth is risky, it may have the opposite effect. You need to make a better case for it. The three most common justifications for growth are: 

  1. Employee retention and development. The best people want to work at dynamic companies that are trying new things. You can’t easily create this energy in a low-growth environment.

  2. Protection against competition and erosion. It is hard to stand still in business. Growth requires exploring new markets, developing new products and building new skills. These capabilities will help to ensure your longevity. “If you are not growing, you are dying.”

  3. Ability to achieve your purpose. Your company has a purpose beyond monetary gain, right? If you want to change the world, you need to expand your reach and impact.

Growing at the right pace

We often are retained by clients who are looking to 2x their business in five years — which requires a 15% year-on-year growth rate. For most companies, this kind of rate might seem healthy, but a lot of decisions must be made to get there. Some include:

  • Do your leaders and partners have the appetite for the work that growth requires? Are they willing to push themselves and their teams beyond their current comfort zones?

  • Are you willing to make changes — not just in what you do, but also in how you do it? 

  • What is the minimum amount of growth required to push your team to the next level?

  • What is growth beyond business as usual?

Riding the energy of your current business will rarely be enough to get you to 2x your gross income. For an established firm, a 15% annual growth rate is an acceleration. For a startup, a 15% monthly growth rate is more likely expected (with ensuing problems).

The most famous recent example of unhealthy growth happened at WeWork. They 10x’d their number of locations in 5 years (almost a 60% IRR, or 4x more than recommended). The growth hid issues with the fundamental business model. While technically profitable, their coworking subscriptions were discounted heavily to drive growth that their business model was unsustainable. As well, there was cultural rot at the core of the company that was driven by the insatiable need to hire. WeWork’s valuation has plummeted from a peak of $47B to $1B. 

Contrast that with Adobe, a software company that was founded in 1982 and has been growing at an average rate of 18% per year. They have consistently reinvented themselves and their offerings to apply their capabilities to new markets. Starting with document creation products, they expanded to the natural new market they created: document management (PDFs). With the profusion of digital cameras, they created Adobe Photoshop. Digital video led to Adobe Premiere and the rise of the creator economy spawned Adobe Creative Cloud. Adobe has consistently and measuredly taken its core skill of creating software for content creation and applied it to new markets and unmet needs.

Sustaining growth in the long term

You need to uncover new opportunities to grow your business sustainably. Sustainable is key. You can offer the unsustainable unit economics so favoured by new entrants (selling quarters for nickels). You can hire more people than you can onboard effectively (another 2020–2021 classic) — but none of these will deliver continuous growth over the long term.

The key to sustainable 15% annual growth is understanding your core capabilities. What allowed you to become an established firm with the privilege to be able to ask, “what’s next for us?” These capabilities are your foundation for deciding where to apply yourself next. 

There are countless opportunities to grow. The challenge is making sure you are doing it at a good pace, in a way that is authentic to you.

Need help understanding your growth objectives? We have a workshop for that. Get in touch if you’d like to connect.


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