Why Grow?
Throughout much of my advisory career, my clients’ focus was on growth, expansion, and all the sub-points that go along with that.
Lately, I am encountering a growing population of clients who are less passionate about growth. They love the size that their businesses are at now, they enjoy their clients, their teams are close-knit and everyone knows everyone’s names.
So… what’s the actual business case for growth?
The reality is that there are times when growth is not necessarily a pull but rather a push. And here are some of the ‘pushes’ that a business owner may encounter:
1. Clients Outgrowing You: as clients’ own businesses grow in scale and complexity, their needs change. Many clients who were very motivated in their own growth plans (or were seeking M&A opportunities) were motivated by the desire to continue to serve their clients through their next stage of growth and to remain their clients’ ‘one-stop’ solution provider.
2. People Outgrowing You: while some employees may reach a point in their career and wish to stay there, many are looking for growth and opportunities to develop, stay challenged, and move up in the ownership structure. Without growth there are often limited opportunities where you risk losing your highest performers if there isn’t adequate opportunity for them to thrive. And without opportunities it is certainly challenging to attract top talent.
3. Infrastructure Investments: one of the biggest challenges for a small business is that the owner wears too many hats: HR, operations, finance, IT, project management… you name it. This means each of these functions is either performed to the best of their ability or capacity, and not necessarily to the optimal level the business needs. As a business grows it starts to have the requisite scale and budget to afford professionals as well as higher end infrastructure to support operations, which has a positive ripple effect on clients, employees and ownership.
4. Market Credibility and Presence: while it is entirely possible to have a strong market presence as a boutique operator, often times credibility comes with a level of presence in the eyes of clients and competitors alike. This can instil confidence in clients and open doors to collaborations with other key players in the market.
5. Purchasing Power
Larger firms can leverage economies of scale to drive down costs; from bulk purchasing to shared resources, it can all positively impact the bottom line while improving the quality of goods and services.
6. Innovation Capability
While smaller firms can be very nimble to innovate and bring-to-market quickly, getting some scale is helpful in bringing expertise to the table which smaller firms have trouble retaining due to cost or attracting in the first place. Scale also helps pursue concurrent or complementary projects whereas smaller businesses often have to make choices as to what to pursue given a variety of constraints. This, in turn, can help stay ahead of competitors and gain a sustainable innovation advantage.
7. Long-term Viability and Succession
Scale doesn’t necessarily mean stability, but solid financial management with scale helps. Especially in businesses which diversify service offerings as they grow, if done strategically, a down-cycle in one can often be offset by an up-cycle in another. Succession is a major hurdle to business longevity and with scale, there are often more potential successors coming up in the ranks to help fill key positions where it makes more sense to grow vs. hire.
The decision to grow is a strategic choice that small and medium professional services firms should approach with careful consideration and foresight. While growth comes with challenges, the benefits of expanding your firm's reach, revenue, and impact are significant - but by all means not a one-fits-all decision. By seizing opportunities for growth, you set the stage for long-term success, innovation, and a thriving presence in the competitive landscape of professional services. For help with how to consider, structure or execute on your growth strategy, contact us.