This comes straight from the “Sh!t Allen Says” Teams channel I mentioned in a few previous blog posts, (Consistency in Marketing (and all things) being one of them. I recently had to say it twice with clients last week, so it’s top of mind to talk about.
“Growing a business is no way to make money” usually catches entrepreneurs off guard. If standing, they step back, or on video conferences, the room gets quiet for a second. I mean, they’ve been investing dozens of hours every week for years to grow their businesses. Why would you say I’m not going to make money?!? How dare I!
Twice the Size with Nothing to Show
But, let’s face it, you grow your business, you fill your free time gaps, and you make some money. Then you get really busy, and there is no way you can sustain the growth so you decide to hire someone or invest in a new tool. This allows you to grow some more, but once again you hit capacity issues, so you tool up or add to the team again. Look back five years and your salary and take-home pay is nearly the same as it was, but now you’re twice the size you once were. Seems like a waste of effort when you look at it solely in this light.
Yet, we grow it nonetheless. Sure, you might expect a consultant like me to talk about gaining efficiencies as you grow with process, documentation, and best practices…and these things are true, but there are still major multiplication effects in growing your business and there have been some great lessons on this during the current pandemic.
When to Grow
I’m going to use my own current business as an example. Our company is relatively new and we were just getting to income numbers that we could invest even more heavily in marketing. We were already doing a fair amount of traveling and a few trade shows, but now we were going to do more, with more of the team. All of the extra income we were generating got immediately allocated to more growth, proving once again, that growing a business is no way to make money.
Yet, here we are with most trade shows shut down and most of our travel stymied in shelter-in-place orders and flight cancellations. Suddenly, we can’t spend our money on those growth plans anymore. Now there is cash stacking up in the bank account looking for a different home. Suddenly, owning this business that we grew the last three years IS a way to make money. This happy-stance (I should coin that phrase) would not have been possible if we hadn’t invested what we did into growth in the previous years.
Profit First, Sometimes
And thus, I always end up adding to the phrase “Growing a Business is No Way to Make Money” with “…but owning a grown business is.” The moral of my story is that you must grow, but also recognize that growth costs money. Conversely, as I try to always see both sides (future blog posts coming out about that), take an occasional opportunity to make sure your business really is growing its profits. COVID-19 might be a great chance to see how you are doing on that front.
Last tiny point, none of this is an excuse to not make a profit EVERY SINGLE MONTH! If your growth plan is causing a loss, reevaluate, or have VERY deep pockets to risk. I don’t want to appear as an evangelist, but “Profit First” by Mike Michalowicz (see our book list) was a great eye-opener for me on the necessity and priority of profit. Cheers until next time.