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The Case Against Small Business Growth

Earlier this week, we posted a blog outlining three reasons why small business growth is good for entrepreneurs and business owners. To summarize, the reasons are because you’re dying if you’re not growing, growth is the only way to create real wealth for yourself, and it’s the right thing to do (read the entire blog here).

While these are certainly valid points, small business growth is also a double-edged sword, with several risks and downsides. Starry-eyed entrepreneurs with grand visions of becoming the next big thing may not think about these challenges, but they are important to consider as you chart the course for your small business:

Most small businesses grow before they are ready to scale. “Scale” is a nebulous term that is often misused, but it is an important consideration for small business owners wanting to grow their businesses. In short, scale refers to your business’s ability to grow without a 1:1 investment of time, money, or effort. For example, a services company that has to hire a person to do one hour of work for each hour of effort provided to its clients is much less scalable than a technology company that can provide it’s software to hundreds of new customers without hiring a single new employee. Maintaining efficient and well-defined business operations and offering products that are not labor or capital intensive are two ways to ensure your business is scalable. Companies that try to go without the right infrastructure in place to support them are much more likely to fail than others.

Growing a business consumes cash. Growing your business typically requires more operating capital than you might have on your own. With the Small Business Administration and other lenders cutting back on small business loans, this is a difficult challenge to overcome. For many entrepreneurs, they simply can’t grow because they don’t have enough cash to fuel that potential growth. Others may be able to grow, but they find themselves not leaving enough cash on the table for themselves because so much of their money is tied up in the business. It is important to map out your financial needs – both for your business and for you personally – so you can determine what degree of growth is the most reasonable and sustainable.

Growing a small business is stressful. There is something to be said for “solopreneurs” and owners of lifestyle businesses that generate passive income without much effort. While these types of businesses are inherently limited in the amount of income and wealth they can generate, they can be a lot less stressful to manage. Hiring and managing employees, dealing with cash shortages (as mentioned above), increasing competition, operational headaches, and a host of other strains rear their ugly heads during growth, which can be very stressful for inexperienced or unprepared entrepreneurs. We have yet to meet a small business owner who didn’t say that growing their business was stressful, and the higher the growth, the higher the stress that typically comes along with that growth.

No one ever said that managing and growing a business was easy, and these three considerations are common reasons why this task can be so challenging. The good news? There are ways to mitigate these risks and challenges so that you can still grow a successful small business or startup.

Read more ways to fuel small business growth in our blog about the Small Business Growth Dial. Or, read about some of the ways that you can grow your small business.

Read more ways to fuel small business growth in our blog about the Small Business Growth Dial. Or, read about some of the ways that you can grow your small business.


1 Comment

  1. […] There are certainly other attractive reasons for striving for small business growth, but these are three of the most important. At the same time, however, there are downsides to growth, which we will cover in our blog The Case Against Small Business Growth. […]

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