Bright Sparks Podcast

How to Grow

May 23, 2022 David Thomson
Bright Sparks Podcast
How to Grow
Show Notes

If you don’t have a plan for growth, you probably won't grow. On the other hand, it’s not impossible. 

You can be totally clueless about growing a business and sometimes it just happens anyway. 

But, normally that kind of unplanned  growth will only happen when two things are present – and those are when you've got plenty of spare capacity and there just happens to be plenty of demand. 

Now just for argument’s sake, let's say you don't have any kind of plan and you end up growing anyway.  What’s that likely to look like?

Well, it can look like two different things. Either, you’ll get very slow growth, which is generally unsatisfactory, or you’ll get uncontrolled explosive growth. 

So, If you haven't planned for growth and it just happens anyway, the results are going to be the same whether it's slow or explosive.  The only difference is that with explosive growth everything happens a lot faster. But in the end, you get the same issues whether it's fast or slow. 

Alright, what are these issues?

A big business is not like a smaller business except for being bigger. And being bigger does not necessarily mean being more complicated. Although we all know often it does mean being more complicated because there are more moving parts. One thing is always true though, when you get bigger, things change. They get different.

 And what happens when things get different? The answer is that you need to adapt. 

Let me tell you a story about a client I had a few years ago who grew without adapting. Spoiler alert - it doesn't end well.

 This bloke had a small business repairing trailers for freight companies. It was just him and one other guy. They turned over about $500,000 annually. Then he put in some tenders for some big jobs and suddenly he had $4M of work lined up. Within 18 months he was bankrupt and had lost his house. I was amazed that he even lasted that long. 

 Now let’s be clear.  There was nothing wrong with the tenders - and in fact there were decent healthy profit margins built in there. He didn’t get robbed.

 And when he first told me about these tenders I said to him, “we need to sit down and work out exactly all the changes you need to make to this business, so you don’t fall in a heap”. And his exact words to me were “don’t worry about it - we’ll sort it out as we go along”. And I said, “no you won’t, because when this thing gets started, you won’t have time”. But I couldn’t persuade him to invest the time upfront to avoid the misery afterwards.

 So, what went wrong? Well, virtually nothing that wasn’t totally predictable.

He went in undercapitalised.  We could have avoided that if we’d sorted his lines of credit before he began the contracts.

 Then he tried to make every decision himself. He suddenly had to employ twelve guys but none of them was a foreman. Chaos took over. The accounts were a mess. He couldn’t handle the accounts payable even though he had the cash to pay - so materials got cut off. Scheduling went out the window. Workflow went from “what do we do today?” to “how do we fix everything that went wrong yesterday?”

 It fell apart. And the old saying applied. “Failing to plan means planning to fail”. So, what can we learn from this?

 Well, we know that humans are psychologically very resistant to changing things that are already working well. But the problem is that when our businesses grow, we just try to do the same thing - but more of it. We stretch ourselves too thin. And we have this terrible tendency to ignore new problems and challenges that we haven’t seen before. We just mentally discount them because they’ve never been an issue in the past and our monkey brain tells us we should just ignore trivial things. But that’s why humans are smarter than monkeys, least many of us are. We have the ability to pl