If Your Business Was A Tree, How Big Should It Be?
The redwood is arguably America’s greatest and most famous tree.
Two of the three species of this prehistoric survivor – the slightly taller coastal redwood (Sequoia sempervirens) and the thicker sequoia redwood (Sequoiadendron giganteum) – are so well known they’re often referred to as “The Big Tree.” And for good reason: both can top out at over 300 feet.
But what about that third one? You know – the diminutive Metasequoia glyptostroboides. This baby, aka “dawn” redwood, aka “amberglow,” is small enough that you can buy one, plant it in your yard, and watch it shoot up to 10% of the scale of its giant cousins.
So, how does an amberglow know it isn’t a sequoia – to stop growing at 30 feet? As with every living thing in nature, including humans, it’s in the genes. When that first drop of water wakes up the amberglow seed kernel and break out of the husk, its genetic code is already at work to make you confident that you can plant them about 20 feet apart.
What if entrepreneurs could shop for a genetically pre-sized business? On that rainy, predawn June morning in 1896 Detroit, when a young Edison Illuminating Company engineer steered his “quadricycle” onto Bagley Street for the shakedown drive, Henry had no idea how big Ford Motor Company would become. Because a small business – Enterprisus incrementum indeterminus – doesn’t have a genetic code. And that’s good news and bad.
It’s good because, unlike an amberglow, never to be mistaken for a Big Tree, a small business becomes the size the founder wants and wills it to be. But it’s bad because how and when that scale manifests is, well, indeterminus. It isn’t in the genes, it’s in the hands – yours, which gives rise to two questions founders go to sleep asking themselves, dream about, and wake up trying to answer:
1. Should I grow my business?
2. If so, how big?
In your quest for these answers, don’t disregard the implications of a powerful intangible force: cause-and-effect, aka life happens. When Ford took that job at Edison in 1893, he had no idea that Thomas would become a mentor.
In his book Warp Speed Growth, my late friend and awesome Brain Trust member of 20 years, Peter Meyer, recorded four fallacies that every business owner must consider in their growth plans. Here they are, each followed by my comments.
Fallacy #1. You can grow out of organizational problems.
In a state of denial or ignorance, small business owners sometimes think getting bigger will fix management and organizational shortcomings. If a tree is bent, fertilizing it won't make it grow straighter – only faster in the wrong direction. If you have organizational challenges, don't grow until they’re resolved.
Fallacy #2. Growth equals profitability.
On planet Perfection, increased sales volume will grow gross profit. But back here on planet Reality, will your organization be able to manage the extra activity well enough to deliver at that increased level of production?
One of the rudest awakenings an owner can have is when projected sales growth is achieved, but profit is no better – or perhaps worse – than before. During the pandemic, many businesses were surprised to discover that gross and/or net profit did not drop at the same rate as shutdown revenue.
Remember Blasingame’s Growth Razor: "It's not what you make, it's what you keep."
Fallacy #3. Profitability improves when every customer is yours.
Being the market leader is overrated, and for a small business, it may well be a fool’s errand. Peter cites research showing only 29% of market leaders were also profit leaders. You’re not Walmart or Amazon. Not only are you not going to sell every customer, as a small business, you don't want every customer. What you want are more customers that will let you make a profit.
Fallacy #4. If you grow, customers will benefit.
Peter says focusing on growth is focusing on yourself. And that self-referential distraction just diverts attention away from focusing on the customer. One of the classic examples of a company's self-involved focus on growth is when it uses the term "fastest-growing" in marketing material – as if this were code for “adding value.” What makes you think customers don't prefer the size that you are? Have you asked them?
Don't get me wrong. I'm the last person to say growth is bad, or that you should be happy with the current size of your company. Indeed, your business may not have growth DNA, but imagining and seeking growth is as much at the core of an entrepreneur as the DNA in the seed of a giant redwood. But I do encourage you to think about why and how you should grow. Consider these six planet Reality growth truths, each followed by a slap-in-the-face question to ask yourself.
• The marketplace is pretty full already. Is there a real opportunity to grow?
• Growth is not self-funding. How will I capitalize the growth I’m planning?
• Sometimes small business growth exists under the alias “deferred gratification.” How long can we wait for ROI?
• Growth takes a company into unfamiliar operational territory. Do I have the staff and systems to blaze that trail without creating a casualty list?
• Being a small business owner should be a source of happiness. Will being bigger make me happy?
• Every business has corporate values – some good, some not so much. If our values are good, can we scale them? If they aren’t, why would we scale them?
And finally, as you seek answers to these growth questions, let me remind you of the instructions Polonius gave to his son, Laertes, in Shakespeare’s Hamlet: “This above all, to thine own self be true.” The Bard understood business growth? Who knew?
Write this on a rock ... Your small business – Enterprisus incrementum indeterminus – doesn’t have growth DNA. Just because you can grow doesn't mean you should. Water it carefully.
Jim Blasingame is the author of The 3rd Ingredient, the Journey of Analog Ethics into the World of Digital Fear and Greed.
