At some point as your business grows and prospers it’s necessary to decide what the right size is for it to be. It seems as if many companies in the past have grown for the sake of growth alone and gotten too big for their own good. This has been particularly obvious during the last year with the global economic meltdown, which has caused even the best companies to struggle. Some of the firms that grew too rapidly and took an excessive risk have suffered to the point of selling, filing for bankruptcy or just plain ceasing to exist.
So what lessons can we glean from the recent past that will allow your business to position itself for the “new normal” state in the future?
The first lesson to consider is what is the right size for your business to actually be to allow it to be:
- Focused on what you really do the best and makes your business distinctive
- True to your company values
- Plan deliberately to achieve the long-term vision for the business and its stakeholders
Let’s look at each element separately
How does your business compare with competitors and industry standards in terms of profitability? Your goal should be to be at the very least above average in your industry. This means continually developing distinctive products and services that are in demand and meet the changing needs and desires of your company’s customers. It also means sweating all of the small stuff to make your existing business as free of waste of all types using Lean and continuous improvement tools. The key question is to answer is how profitable your business should be in terms of net margin or EBITA, not how large it is in terms of total sales.
Focused on What You do Best
Paying attention to what your customers think that you do the best and makes your business distinctive is another piece of the puzzle in terms of size. This is your primary reason for existing as a business, it’s what your people value when they come to work and it should be protected and enhanced. Distinctive products and services are the heart of your business’s profitability. Answer the question, what is the right size for your business to be to deliver on your promises to existing and new customers? Are there alliance partners that would enhance your ability to deliver on what you do best without taking on the costs of an acquisition or other risks?
Staying True to Company Values
What is it that your company stands for at the end of the day? What principals explain what these values really are? If you had to walk away from an opportunity because it conflicted with these values in some way, would you do so? These are the questions that define Values and will help determine what the right size your business should be to protect them, because if you walk away from what you stand for as a business you will be at sea without an anchor.