THE CASE FOR GROW FAST
The early bird gets the worm… but the second mouse gets the cheese
In some businesses, time to market matters a lot. The second inventor of something new is often not rewarded the same as the first. This is especially true when patents are involved.
So, if your business is working on something new, and others are working on similar things, get to the finish line – get it done and patented – as quickly as possible. Don’t waste time or get distracted by other things. And do not waste money.
Concentrate resources on formulating the “special sauce” as soon as possible. Once it’s ready to go, then concentrate your resources on marketing and promotion. Seek to establish your business as the go-to provider as quickly as possible.
Also, if you’re in a business where you must be large to succeed… or if you’re getting into a new market segment that can only support one large player, get large as quickly as possible.
Just know that “getting large as quickly as possible” often requires outside investment capital. And that means pressure is on to get it right. The first time. So prepare accordingly, and choose your capital providers accordingly.
Self-funding is in my opinion the preferred funding method because it protects businesses from disruptive external influences and pressure. But, if you can’t self-fund your business and need to grow fast, you’ll likely have to borrow some dough or line up venture capital.
So, to grow fast, you need strong creditworthiness, a strong plan for obtaining investment capital, and the ability to manage your business finances efficiently. Take away any of these three and there’s a good chance you’ll face difficultly or failure, even as your grow rapidly!
Fast growth can be essential in some situations. It works best when there is only one “worm” to be won. And it’s a big ol’ winner-take-all worm that goes to the first bird on the scene.
If that’s your best market opportunity; get up early, get in high gear, and get there first!
In the next section, I’ll tell you why slow (or moderate) growth is often better… especially in capital-intensive industries where the “mice” (business owners) don’t want to get killed or perpetually-trapped in debt as they grow.
THE CASE FOR GROW SLOW
The early bird gets the worm… but the second mouse gets the cheese
What grows when a business grows? Sales? Check. Profits? It doesn’t make sense to me when businesses grow without profit growing… So, make that double check on profit growth!!
What else grows though?
Often, debt. Accounts receivable. Owner taxes. Staff. Facilities. Equipment. Trucks. Needs for cash and working capital.
Fast growth kills or maims many “first mouse” businesses that race after the cheese only to consider these full costs of growth after the fact.
“Second mouse” businesses take a “slower,” safer, and often more profitable approach to growth. They seek to grow as fast as they can sustain, but not so fast as to kill or destabilize the business in the process.
Whereas first mouse businesses tend to think only about growth in terms of how much, how fast, how soon… second mouse businesses consider all costs of growth, how much growth they can self-fund, how to keep the owner fed while aggressively reinvesting in the business, how much debt they’re willing to take on, and for how long, etc. They make annual plans using tools like this one and know what they can and cannot sustain.
Second mice are better chess players. They pre-think and project a range of implications and possibilities before taking action.
Nothing about business or planning is ever guaranteed or static. Yet, certainly taking the time to notice the ominously-recoiled springs above those “hunks of cheese” is never a bad thing if you’re a “mouse” running a growing business!
It always saddens me to see businesses caught like mice in traps, and far too many of them get there by growing too fast. Show me though a business that thinks like a “second mouse," and I’ll show you a well-fed and thriving one. That makes me happy!
There is no reason that cannot or should not be you and your business!
It is particularly important to think this way in businesses where growth requires significant capital investment like computers, equipment, trucks, etc. It is also essential in businesses that have accounts receivable and significant needs for cash and working capital.
The unanticipated or unplanned costs of growth in these areas often leave a business and its owner starved for cash when the growth pace gets too fast. Yes, speed kills some businesses!
Though it seems counter-intuitive, in situations like this… to speed up, businesses need to slow down. A dead or maimed mouse in never going to win a race – at least any race that results in success or victory!
First mice are good at producing free or low-cost meals for their “second mice” competitors that were not so quick to rush in after rapid growth.
Countless businesses fail every year, and what happens then? Their assets get sold or auctioned off to more patient and disciplined “mice.” Quite often at greatly-reduced fire sale prices.
The early bird gets the worm… but the second mouse gets the cheese!
Having A/Rs and high capital costs... often means slower growth is better growth - especially when owners need to continue taking their draw!
If you’re operating in a capital-intensive industry… or a cyclical industry… or if you have accounts receivable… be a second mouse!
When your competitors get caught or killed in traps, and their creditors approach you to buy their assets or businesses for cents on the dollar… not only will you have saved your own neck by taking a slower approach, you will ultimately speed up your business growth and face lower competition in the process.
Second mice get the cheese. They can never predict exactly when that cheese will become available… but smart second mice plan as if this will happen at some time!
The next time the economic tide recedes and lots of first mice are caught in traps… notice how a few select mice are in position to pick up or take over all the free (or low cost) cheese left behind.
Here’s to your business being one of those second mice! May you and your business have the wisdom and discipline to speed up progress by slowing down your growth…
The process starts with you having a plan for how you manage your cash flows each and every year. We've got a free tool to help you do that and encourage you to download it here.
Long live small business! Long live small business owners!
Jim Smith, Founder, PERFORMIDABLE, LLC