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Choosing the Right Growth Strategy

Andrew J. Sherman, Partner, Dickstein Shapiro Morin and Oshinsky LLP

I have spent the better part of my professional life helping companies of all sizes and in many different industries develop strategies to build their businesses, and I’ve observed that companies of all types and sizes want their companies to grow in one way or another—whether in terms of growth of revenue, profit, number of employees or customers, market share, or number of locations. Not everyone always has aspirations to build the next Roman Empire, but everyone wants to see progress from one year to the next, even if it’s just in the amount of money they can take home to their families.

From a legal perspective, the more things change, the more they seem to stay the same. Owners of fast-track growth businesses continue to worry about some of the same issues that plagued them at the turn of the 20th Century, such as OSHA health and safety standards, minimum wage standards, personal injury and workmen’s compensation claims, and product liability litigation. These issues may never be entirely resolved, but as our economy remains volatile, new legal, financial and organizational issues have begun to emerge involving protecting intellectual property, doing business in the global village, transacting business via the Internet, and a renewed focus on satisfying (and keeping) customers.

Growth Challenges for Entrepreneurial Companies

These economic and organizational shifts are creating new legal challenges for entrepreneurial companies. Global competition and rapid technological advancements are creating new business management models, such as a geographically dispersed work force, a flattened organizational structure, and strategic partnering among customers, vendors, suppliers, and even competitors. Companies of all sizes are developing work teams that communicate and collaborate electronically instead of around a conference table or by the water cooler. The virtual workplace—in which there is significantly less human interaction—brings new challenges in the areas of protection of privacy, confidentiality, and copyright laws.

Given these rapidly moving changes in our marketplace, the challenge for the entrepreneurial company is how and when to grow. And this leads to other major questions that can be difficult to answer. What strategies should be used to facilitate growth? How do you know whether these strategies are appropriate for your business? Are there problems with your business structure that need resolving before you can implement the growth strategy selected? How can you build on your strengths and compensate for your weaknesses? How might the growth strategy selected present new risks or make you vulnerable and, if so, to whom? Is this the right time to grow? That is, have you put a proper foundation for growth in place? Is capital available to fuel growth? Are market conditions ripe for growth opportunities?

Setting the Stage for Growth: Internal Factors

Before you can prepare your company for growth, you need to analyze its strengths and weaknesses. Looking for what’s working well serves to concentrate your efforts where you have the best chance of success. Looking for strengths enables you to also spot the weaknesses. Start with these internal areas:

  • Costs and revenue Examine every part of your business. Is revenue rising or falling? How about profit margin? Which divisions or departments stand out? Why? Do you enjoy a strong positive cash flow?
  • Personnel Do certain employees show exceptional skills or produce outstanding results? Where in the company is the strongest management, organization and planning? Do you have the talent on staff to handle anticipated growth, or would you have to hire new personnel?
  • Operations Are the areas that seem to be trouble-free functioning with little supervision and always delivering results? How do the managers in these areas achieve such consistent results?
  • Philosophy or mission Do you have a written statement describing your company’s philosophy or mission? Does it define the essence of your business exactly so that you know which kinds of activities fit your company’s goals and which don’t? Are you diluting your resources by engaging in any activities outside your mission? Have you developed a set of core values, and have your employees embraced those values?

Setting the Stage for Growth: External Factors

Once you’ve sized up your business internally, take a long and careful look at the external factors that should reveal whether you are in a position to take advantage of current business trends and cycles. These include the following:

  • Your market . Is your market share—your company’s percentage of estimated total business available—increasing or decreasing? Is your marketing strategy based on careful research or on instinct and hunches? Is your customer or client base shrinking?
  • Your competition . Do you know exactly who your competitors are, and where they pose the largest threat? Which part of your business is most vulnerable to competition and which is least vulnerable? Are some parts of your market becoming crowded with competitors?
  • Economic climate . Are changes in economic conditions—interest rates, inflation, housing starts, industry earnings—likely to affect your company? Do you make efforts to stay on top of things so that you can anticipate changes in the marketplace, or are you often surprised by developments that affect your company?

Your answers to these questions will give you an idea of where your company is strong and where it could improve as well as which type of growth strategy would be best. Consider the questions carefully and respond as if your company’s future growth depends upon your answering them thoughtfully – because it does.

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