controlled growth

One of the greatest perks of my day job is that I get to meet all kinds of entrepreneurs, investors and VCs in the Seattle community.  Many of these meetings lead to "Aha" moments where I furiously write mental notes regarding what to do or avoid doing in a business.  A recent meeting I had was with a woman entrepreneur who instantly became my hero because not only did she grow the revenues of her business by 50 times in 10 years (from $500,000 when she bought half of the company for $15,000 to $20,000,000 now), she did all of this while working part-time (so she could spend time with her family).  How cool is that?

Her secret?  Controlled growth.  As she showed us the graph of the revenues of her companies, rather than the hockey stick that all entrepreneurs seem to hope for, hers was more like a very deep staircase -- upward movement followed by a period of flatness, followed by upward movement.  The periods of flatness are the times that she deliberately did not take new customers so that she could focus on making improvements in operations and in building up her cash supply (yes, she agrees that cash is king).  As a B2B business serving large corporate clients, part of her controlled growth strategy was to diversify her portfolio of clients so that no one business would become an 800-pound gorilla with the power the make demands that are not in line with what is best for the company.

One company that comes to mind when considering what can happen when a company grows too fast is homegrocer.com, the enormously well capitalized company from the 1990s that is now used as an example of a most spectacular failure in every business school.  OK, so homegrocer might have had a few other things going against it, but trying to grow too fast -- before it had figured out how it is going to operate, who its customers are, and the checks and balances of financial statements -- was definitely a major factor.

So grow, but be smart about it.

Mina