Size Matters: The Impact on Quality of Life Business Scope Has
November 12, 2014
Go Big or Go Home vs. Small Is Beautiful
Your fledgling venture has been doing well. You pay yourself a living wage. You’ve even been able to hire a freelancer to help you with projects from time to time. You have an accountant. You have outside general counsel services from Executive Legal Professionals. Things are looking good. What now?
Do you decide to double down on your profitable venture, and try to see how far it will go? Do you keep doing what you’re doing and let your business grow organically or just focus on quality, instead of quantity? Despite what some might say, size matters! The scope of your business often has a direct impact on your work / life balance, and, therefore, your quality of life. This is true for executives in larger companies just as it is for entrepreneurs in start-ups and smaller firms. So, how do you decide?
Five Questions to Help You Scale Your Business to Your Life
Right now, today, am I doing what I love?
Do you love what you do? If the answer is, “No,” “Not Really,” “I think so,” or “Yes–for the most part,” maybe you should consider doing less of what you do, now, and more things about which you can truly be passionate. Maybe that means taking your business in a different direction. Maybe it means you should start looking for an exit strategy. If the answer is, “HELL YEAH,” you know you’re doing something right, and maybe doing more of that would be a good thing. Unless you can honestly say, “Hell yes! I love what I do,” you probably should reconsider growing your business.
Is there more demand than supply for my goods / services?
How much of my company’s growth in my industry will the market bear (support)? If there is more supply than demand for the goods or services you produce, increasing your business will require you to either lower your prices or capture some of your competitors’ market share. Even if you capture some of your competitors’ market share, you may still have to lower your prices, because your competitors may lower theirs in order to recapture the customers or clients you’ve taken. If demand outstrips supply, growth is indicated. Of course, you can always try to create more demand, but make sure you understand the costs and risks involved.
To understand this, consider an example. If Billy and Susie open two identical lemonade stands on the same street, facing each other, and there is an equal amount of traffic on both sides of the street, what happens to Billy if Susie decides to double her production from one pitcher to two pitchers of lemonade per day? Well, if enough people come to the lemonade stands to sell a total of four pitchers, the answer is: probably nothing! Billy is still likely to be able to sell all his lemonade. If, however, there are only enough people to sell two pitchers, Susie is going to want to sell all her lemonade (to avoid waste), and is, therefore, likely to cut prices below Billy’s and take as many of his customers as she can.
Competition in the free market requires participants to at least attempt to gauge demand for their goods and services. Understanding demand can help you understand whether or not there is room for growth. Only when demand outstrips supply is growth indicated, because when supply outstrips demand, prices (and profits) tend to decline.
How Strong Are Your Leadership Skills?
Usually, deciding to increase the scope of your business means working with–and usually managing–more people. If you lack either the will or the ability to effectively, efficiently lead a larger team, you may find yourself doing less of what you love and spending more time feeling like you’re herding cats. Even if you are a strong leader, putting together the right team to help your business establish and maintain a healthy growth rate is a big challenge. For people who enjoy and find themselves attuned to the demands of leadership, this challenge will be one they enjoy overcoming; for everyone else, it is likely to seem like a distraction from doing what they truly love.
How Much Will Growth Cost Me?
Growth is expensive–especially in the near term. Choosing to grow your business can be a wise long-term decision, but usually there are many up-front costs that have to be paid before you start to see the benefits your growth may bring. You need to be able to (1) plan your expenses and (2) draw a clear line between what costs you expect to incur and what benefits you expect those costs to produce. If you can’t project a reasonable return on your investment, forego the expenditure!
What Do My Advisors Think?
You should ask your attorney and your accountant (and anyone else whose business judgment you trust) what they think about your plans for growth. Use a non-disclosure / non-compete agreement to cover your trade secrets, if necessary. The important thing is: we all need advice from time to time–especially about big decisions. You don’t want to ask just anyone for their opinion, either. You should ask professionals, people with business or professional experience, people with life experience, and people who you consider to have deep pools of wisdom from which they regularly draw worthwhile insights. Ideally, your company will have an advisory board or at least a small group of informal advisors (which should include at least one lawyer) that you can go to when you need counsel. If everyone is telling you the same thing, you should probably listen.
A Final Thought
Your passion, the demand of the market, your leadership capacity, the expected cost, and the counsel of your advisors are all important factors to consider, but the most important factor in deciding whether or not to grow your business is this: the reason you are in business, in the first place. Why do you do what you do? Are you doing it for the money or for glory, or for the sake of creativity, or to help others, or for some other reason?
Will growing your business serve the fundamental purpose for which you are in business, or is growth a consideration that you have embraced for some other reason? Remember why you do what you do, and let that always be your guiding light.
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