Step 2: Know Why You Want to Grow Before You Chase New Business
Originally written by Dan Doescher. Updated by Tom Doescher.
Note: If you missed the introduction or earlier steps in this series of blog posts, please click here to read it.
Maintaining the status quo as a sustainable option is a risky strategy.
That may sound a little strong, but in most markets it is true. Compared to your competitors, you are usually either growing or declining. Very few companies get to simply stay the same for very long.
Customers change. Competitors improve. Team members move on. Technology shifts. Margins tighten. Markets consolidate. What worked five years ago may not be enough five years from now.
That does not mean every business should chase growth at all costs. In fact, growth for growth’s sake can be dangerous. But it does mean business owners and leadership teams need to be honest about where the company is headed.
If you are not intentionally moving forward, you may already be drifting backward.
Growth Begins with Why
Knowing why you want to grow is a critical first step in developing your plan.
This series is focused specifically on new customer and client attraction. That is only one form of growth, but it is an important one.
Many companies say they want more new business, but they have not clearly defined what that growth is supposed to accomplish.
That is a problem. Growth should have a purpose.
Are you trying to strengthen the company for long-term continuation?
Are you trying to reduce dependency on a few large customers?
Are you trying to increase profitability?
Are you preparing for transition or eventual sale?
Are you trying to create more opportunities for your team?
Are you trying to build a business that is less dependent on the owner?
Those are very different reasons for growth, and each one may lead to a different strategy.
At Doescher Group, we often talk with business owners about building stronger, more valuable, and more transferable companies. Growth can certainly be part of that. But not all growth creates value. Some growth creates complexity, distraction, margin pressure, and stress.
That is why the “why” matters so much.
Growth Does Not Automatically Mean Higher Profitability
It is tempting to think that growth automatically results in higher profitability.
It does not.
Just ask General Motors and many other large companies that have learned the hard way that more revenue does not always mean a healthier business. A company can grow the top line and still create very little additional profit. In some cases, growth can actually make the business weaker if it requires too much capital, too much management attention, or too much operational strain.
Increasing profits is a worthy pursuit, and it is often one of the main reasons companies pursue growth. But it should not be the only reason. A balanced approach is advisable.
We should also be mindful of Arthur Andersen’s infamous demise. While there were many factors involved, the firm’s unreasonable focus on growth and increasing profits helped create the conditions for a devastating collapse.
That is a strong reminder that growth without discipline, values, and sound judgment can become very dangerous.
Good Reasons to Grow
While growth for growth’s sake is not a recommended strategy, there are many good reasons to grow.
Some of them might include:
Building a stronger base and critical market mass for entity continuation. A company may need more scale to remain competitive, support infrastructure, or survive market changes.
Increasing specialization to better meet customer or client needs. Growth can allow you to develop deeper expertise, hire more specialized talent, and serve customers at a higher level.
Expanding product or service offerings to become a more complete solution. Sometimes growth allows the company to serve more of the customer’s needs and become a more valuable partner.
Entering new geographic markets to build or expand competitive advantage. For some companies, new markets reduce risk and create additional opportunities.
Increasing the opportunity to acquire competitors or prepare for an exit strategy. Growth may position the company for acquisition opportunities or make it more attractive to future buyers.
Increasing opportunities for current and future staff. A growing company can create new roles, leadership opportunities, and career paths for talented people.
Increasing pay to help attract the best talent. In many industries, attracting and retaining strong team members requires the financial ability to compensate them well.
These are all legitimate reasons to grow. The key is to know which ones apply to your company.
If the leadership team is not aligned on why the company is pursuing growth, the growth effort can become scattered very quickly. One person may think the goal is profit. Another may think the goal is market share. Another may think the goal is enterprise value. Another may think the goal is creating opportunities for the next generation.
All of those may be valid, but they need to be discussed openly.
Strategic Planning Creates Alignment
When properly approached, strategic planning defines why you want to grow. It also provides alignment for how to allocate resources and focus your team’s efforts.
This is especially important for owner-operated businesses. In many of these companies, the owner has a vision in their head that has not been fully communicated to the team. The owner may know why growth matters, but the team may not.
That creates confusion. Strategic planning helps answer important questions:
Where are we going?
Why does it matter?
What kind of growth are we pursuing?
What kind of growth are we avoiding?
Who is responsible?
What resources will be required?
How will we know if we are succeeding?
Without that clarity, “growth” can become a vague rallying cry. Everyone agrees growth sounds good, but no one knows exactly what it means or what should happen next.
That is not a plan.
Are You Actually Ready to Grow?
Even if you have a strong reason to grow, that does not automatically mean you are ready to engage in growth-oriented efforts.
There are several fundamental questions you should consider before proceeding.
Are Your Existing Customers Satisfied and Profitable?
Are you scoring better than average, or perhaps even in the upper quartile, with existing customer or client satisfaction and profitability?
The worst thing you can do is put your current customer or client base at risk because you are distracted by chasing new business.
This happens more often than people realize. A company gets excited about growth and begins investing time, attention, and resources in new opportunities. Meanwhile, existing customers start to feel neglected. Service levels slip. Communication becomes inconsistent. Quality suffers. The team gets stretched too thin.
That is a dangerous trade.
Before you chase new customers, make sure you are taking excellent care of the customers you already have. Your current customer base is not just revenue. It is also reputation, referral potential, proof of value, and the foundation on which future growth is built.
If your current customers are not satisfied or profitable, more customers may only magnify the problem.
Who Will Lead New Business Development?
Who will lead the new business development effort?
Are they truly empowered to make things happen? Do they have the time to devote to such an effort?
This is not easy stuff to begin with. Not having the right person or team properly equipped is likely a doomed effort.
Many owner-operated businesses struggle here. The owner is often the best rainmaker, the most credible relationship-builder, and the person with the deepest industry knowledge. That may have worked in the early stages of the business, but it becomes a constraint over time.
If the company’s growth depends almost entirely on the owner, the business is more fragile than it appears.
A stronger approach requires identifying who will lead the effort, what authority they will have, what support they will receive, and how success will be measured.
This may include a dedicated hunter, a business development leader, a sales team, technical experts who are trained to develop relationships, or some combination of these. But someone must own it.
And that person must have both the responsibility and the authority to make progress.
Are Your Systems Ready?
Are your systems, your operations and administration, sufficient to respond to new business?
This is one of the most overlooked growth questions.
A company can successfully attract new customers and still damage itself if the internal systems cannot handle the additional volume, complexity, or expectations.
Can operations deliver?
Can customer service keep up?
Can accounting handle the billing?
Can leadership manage the added complexity?
Can the team maintain quality?
Can you onboard new customers smoothly?
If the answer is no, growth may expose weaknesses that were already there.
That does not mean every system has to be perfect before pursuing new business. No company is perfect. But leadership should be honest about the gaps and intentional about addressing them.
Otherwise, the sales effort may write checks the rest of the organization cannot cash.
Are You Prepared to Invest?
Are you prepared to invest the additional money needed to ensure the effort has a sustainable opportunity for success?
New business development takes time, money, leadership attention, and patience. It may require compensation changes, marketing support, technology, travel, training, content, proposals, customer research, industry events, and additional operational capacity.
Too often, companies want the benefits of growth without the investment required to support it.
Budgets and plans are strongly recommended. They help define success, set expectations, provide a compass showing your current position, and give you the opportunity to change direction when needed.
And you will need to change direction.
That is not failure. That is part of the process.
A good plan does not remove uncertainty, but it gives the team a way to make better decisions as reality unfolds.
Growth Can Help or Hurt
If your responses to these questions are not clearly affirmative, more work is likely needed before proceeding.
That may not be what an eager leadership team wants to hear. But it is better to pause, strengthen the foundation, and pursue growth wisely than to charge ahead and create more harm than good.
Growth can be one of the best things that happens to a company.
It can create opportunity.
It can increase value.
It can strengthen the team.
It can reduce risk.
It can expand the company’s impact.
It can help the owner build a more transferable business.
But poorly planned growth can do the opposite.
It can strain operations.
It can hurt customer relationships.
It can expose weak leadership.
It can reduce profitability.
It can create confusion.
It can make the owner even more trapped in the business.
That is why growth must be approached with clarity and discipline.
A Final Thought
Before you chase new business, make sure you know why you want it.
Then make sure your current customers are well served, your leadership team is aligned, your business development effort has an owner, your systems can support the growth, and you are prepared to invest in the effort.
If you cannot answer those questions clearly, do the work first. Growth is important. But the right kind of growth is even more important.
