Conventional wisdom says that business strategy should focus on growth. Take what you achieved last year and increase it by x% next year. But what if the implications of growth are difficult to comprehend? Is sticking with what you’ve got a viable alternative, or is it foolish and lacking in enterprise?
This is a question I’ve been wrestling with over the last few weeks.
It’s been a full year since I established myself as an independent consultant. My first twelve months went exceptionally well; better than I hoped for. There was a big dose of the unknown when I set my revenue and profit targets this time last year. I thought they were challenging, maybe even unrealistic for my first year in business.
But much to my delight (and that of my wife, who has been hankering after a new kitchen for many years!), I was fortunate enough not only to hit them but to exceed them.
The thing is, I know how much work went into achieving what I did last year. There were a couple of months where I honestly didn’t know how I’d get everything done that I needed to. It’s not like I have a team of people I can lean on or delegate to. When people hire me, they hire ME.
So while I take great care in not over-extending myself and managing my workload, there are inevitably times when it takes long hours, focus and dedication to get everything done.
Growth, however that is defined, is normally the target for businesses pretty much across the board, whether you’re measuring sales, marketing, PR, HR or any other business function. And to grow usually necessitates one of two things: working harder or charging more.
The former is not something I’m inclined to do as, for 75% of the year, I’ve achieved a work/life balance I’m very happy with. And the latter is risky, as anyone running any sort of business will know.
So rather than setting growth targets, what if I use 2016 to consolidate? What if I take a more defensive position?
Does consolidation smack of a lack of ambition and drive? Is it failing to capitalise on the opportunity that I thought was there a year ago and I know is there now? Does it fail to seize the moment? Would I regret doing that in the future?
Those are the sorts of questions I’ve been asking myself.
The Case for Consolidation
For any business, efficiency is absolutely key. There’s no point whatsoever spending time and resource on business development if the core of that business is not performing as well as it can do.
I pride myself on giving each and every one of my clients maximum attention and effort. 90% of my business comes through word of mouth and so I live and breathe by my reputation. Compromising this is not an option, and yet I see many business that do. Poor customer service and lack of care and attention are, if not commonplace, certainly not rare.
But it is existing customers that underpin future growth for any business. In my case, whether or not I continue to work with them in the long term (if I were to increase my rate, for example), my existing clients are my lifeblood.
Revenue, Efficiency & Timing
The growth versus consolidation dilemma comes down to timing. And to overcome it, there are several questions that we can ask ourselves and that we need answers to.
- Is there any capacity in the business, or can it easily gain capacity? Could it cope with expansion?
- Would outsourcing certain tasks or aspects of the business be an option? What are the potential costs of this compared to the benefits?
- Would existing customers lose out by expanding, and how could the effects be minimised?
- Are there resources or systems in place that would enable development alongside existing business?
- How would existing customers respond to a rate increase, and would you gain enough revenue from new clients to benefit from the potential loss of some existing customers?
A lot of these questions come down to efficiency; getting the business running as efficiently as possible in terms of costs, resources and margins. That’s what consolidation is really about; making a business as lean and profitable as it can be.
With that in mind, you could argue that consolidation is a long-term strategic play, whereas short-term growth is about making hay while the sun shines. Both are valid.
And so back to one of my original questions. Do you think consolidation is unambitious? Should growth be the prime driver? What’s your view or experience?