What are the Keys to Small Business Growth?

Keys to Unlock Growth

If you are a small business owner, then you are fully aware of how important business growth is in today's marketplace. If you are not moving forward, you are falling behind. If you are not growing, you are dying. If you are not changing, you are being leapfrogged by your competition.

The first key takes us back to high school and college. People who got B's manage people who got A's in companies owned by people who got C's. You may have also heard a similar thing about law school. Those who got A's became teachers, those who got B's became lawyers, and those who got C's are out making all the money just not as lawyers. In my experience, there is absolutely truth in both of these and you often see it in very successful organizations. People who got A's are great at managing details and executing tasks, however people who got C's are great at setting direction and steering the ship. Maybe people who got A's did so with too little effort and never learned the resourcefulness of those who got C's.

The Theory of Constraints says that there are three keys to growing a company quickly. They are throughput, inventory, and operating expenses (in priority order). Often when a consultant is brought in to help a company grow, they begin by focusing on operating expenses. This is the last place one should start. You want to grow the business, not plug all of the leaking holes. You can plug those up later. Perfect examples are Amazon.com and Zappos.com.

Throughput is the key to growth and is defined as sales minus cost of sales. One of the greatest business thinkers of our time, Peter Drucker, tells us that business is two things: Marketing & Innovation. These are also what make up throughput. Thus, the keys to the success of your company are in the hands of whomever drives marketing and innovation within your organization. As Good to Great told us, we need to get the right people on the bus and then get them into the right seats. Do you have the best people on your bus and are they in the right seats?

Here is an interesting story you may not have heard. When Amazon first began offering free shipping with $25 purchase, they saw a tremendous spike in sales. However, in France they literally saw no change. After some detective work, they realized that the offer to all customers in France was not free shipping but instead shipping for one Franc (about 20 cents) with $25 purchase. They fixed the error and instantly sales spiked like all of the other regions. Free is a BIG deal!

Sure, the free shipping cut into Amazon's margins. However, they wanted to grow exponentially. However, it required six years of hard work before turning their first net profit. Zappos offers free shipping and unlimited returns at their expense which obviously costs them significant money. It took them about seven years to get their first profit.

Companies that do more than just dream of growing fast (actually do) hire people before they can afford to and make offers they cannot afford to make. That is how they grow so fast. They take huge risks and hope they pay off. Too often companies pay lip service to fast growth but their actions speak of slow and steady growth. In this case, you really cannot have your cake and eat it too.

Image Credit: Bentley Motors