Author: Doug and Polly White / Source: Entrepreneur In our experience, most small business owners want to grow their companies. There are
In our experience, most small business owners want to grow their companies. There are many reasons to grow your business, including economies of scale. However, some entrepreneurs who could ordinary grow their businesses instead choose to limit the growth of their enterprise.
Sure, we’ve heard the mantra: You have to grow or die. Yet we have found example after example of business owners who debunk this myth. Here are five primary reasons we’ve discovered why these entrepreneurs have decided to limit the growth of their businesses.
1. Time needed to achieve profitability
New businesses may take a while to reach profitability, as their owners refine the business model. In fact, we have often advised entrepreneurs to ensure they have a profitable business model before growing.
If it costs you $7 in material and labor to make a widget that you sell for $5, you’re not going to make up the difference in volume. We worked with a home healthcare service that routinely deployed caregivers who cost the company more in wages than the client’s bill rate — that is, until we pointed this out to the owners. Obviously, you can’t stay in business long with this model.
2. Aim not to put financial stability at risk
When a business is throwing off sufficient cash for the owner to achieve his or her financial objectives, many people decide not to incur the additional risk associated with further growth.
A conversation we had with the owner of an automotive body shop illustrates this. He explained, “My house is paid for, my cars are paid for, my river house is…
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