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Choosing the Right Growth Strategy


By:  Andrew J. Sherman, Esq.
Dickstein Shapiro LLP
Chief Educational Officer – Grow Fast Grow Right Enterprises

I have spent 25 years of my professional life helping companies of all sizes and in many different industries develop strategies to grow their business, and I’ve observed that companies of all types and sizes want their companies to grow in one way or another—whether it’s in terms of growth of revenues, profits, 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 that 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 growing businesses continue to worry about some of the same issues that plagued them at the turn of the last 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 protection of intellectual property, doing business in the global village, transacting business via the Internet and the renewed focus on satisfying (and keeping) the customer.  These economic and organizational shifts are creating new legal challenges.  Global competition and rapid technological advancements are creating new business management models, such as geographically-dispersed work forces, flattened organizational structures and strategic partnering among customers, vendors, suppliers, and even competitors.  And 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 where 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 is—how and when to grow? And this question leads to other key 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? 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

Before you can prepare your company for additional 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. And by looking for strengths, you’ll also spot the weaknesses. Start with these areas:

  • Costs and revenues. Examine them for every part of your business. Are revenues rising or falling? How about profit margins? 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 these areas that seem to be trouble-free, functioning with little supervision but always delivering results? How do the managers in those 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 they been embraced by your employees?  After you’ve sized up your internal operations, take a long and careful look at your market, your competitors and the current economic climate. This external examination should reveal whether you are in a position to take advantage of current business trends and cycles.

  • 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 those 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 for your company.

Effective growth management involves:
(1) understanding why the company wants or needs to grow;

(2) clearly defining the objectives that growth will achieve or problems that growth will solve;

(3) the management’s understanding of the challenges and risks that rapid growth will pose to the company, especially if the growth process is not well managed; 

(4) understanding the various phases of growth the company will experience as it evolves towards maturity; and

(5) implementing a growth management process that is responsive to and reflective of your company’s current stage of growth.


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ABOUT THE AUTHOR

ANDREW J. SHERMAN is a Partner in the Washington, D.C. office of Dickstein Shapiro LLP, with over 400 attorneys nationwide.  Mr. Sherman is a recognized international authority on the legal and strategic issues affecting small and growing companies.  Mr. Sherman is an Adjunct Professor in the Masters of Business Administration (MBA) program at the University of Maryland and Georgetown University where he teaches courses on business growth, capital formation and entrepreneurship.  Mr. Sherman has been General Counsel to Young Entrepreneurs’ Organization since 1987.  Mr. Sherman is also the founder of Grow Fast Grow Right, an education and training company for executives of middle market companies (http://www.growfastgrowright.com).  Mr. Sherman is the author of seventeen (17) books on the legal and strategic aspects of business growth and capital formation.  His most recently published books include the recent three-part Kaplan business growth series, Grow Fast Grow Right (November 2006), as well as Build Fast Build Right and Start Fast Start Right, to be published by Kaplan in the Spring of 2007.  Other recent titles include The Complete Guide to Running and Growing A Business, published by Random House in November of 1997 and Mergers and Acquisitions: A Strategic and Financial Guide for Buyers and Sellers, published by AMACOM in March of 1998, the second edition was published in November 2005 and Parting Company, published by Kiplinger’s in May of 1999, Raising Capital, published by Kiplinger's in Spring of 2000 and Raising Capital (2nd Edition), published by AMACOM in February 2005 and Fast Track Business Growth, published by Kiplinger's in January of 2002.  Mr. Sherman can be reached at 202-420-5000 or e-mail ShermanA@dicksteinshapiro.com.

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