Planned growth vs. planned non-growth

Scope

Planned growth can be in the area of equipment, revenue, physical location(s), personnel, or any other part of your company that flexes as it matures.

Regulatory citations

• None

Key definitions

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Summary of requirements

An incorrect assumption often made by new businesses is this: “We as a company want all the business we can get regardless of the associated costs.” This train of thought coincides with the adage, “Any business is better than no business.” Pursuing this path of unplanned growth can be disastrous if it does not coincide with your original mission and vision for your company.

For example, you’ve recently started your trucking company; you have two trucks and a small handful of satisfied customers. These customers have helped you realize your vision and you feel a certain level of loyalty to them. You are right on schedule based on the action plans that you developed earlier.

One day you get a call from a new potential customer. The customer says, “I want you to haul all my freight and I need to know how soon you can accommodate me.” Your immediate thought may be, “What an opportunity!” Think of all the new revenue you could realize with an immediate increase in your freight volume. You may tell the new customer that you can start next week; all you have to do is figure out how to get more equipment.

Here is where the problems start. The new customer needs to move 10 trailer loads of freight a week, and goes to areas of the country that you had not previously explored as far as return freight feasibility, associated costs, etc. You are a knowledgeable business owner; does this make good business sense? Remember you only have two trucks and a few loyal and very satisfied customers. Can you obtain more equipment and drivers immediately? Can you really afford to increase your equipment debt based on an assumed increase in revenue? Will your current customer base experience shipping delays because you are stretched too thin? Will the people who have supported you thus far feel abandoned and start looking for a new company to haul their freight? If you don’t take care of them, they will.

Here’s the most important question you have to ask yourself as a business owner whenever presented with a situation such as this: “Is this part of my vision and plan for success?” If the answer to this last question is no, then you must turn down the new customer and move on. The lesson to learn here is you have just honored your plan for growth and realized that consistent, planned business growth is sustainable and ultimately much more profitable.

These kinds of opportunities will come again and again. If you stay true to your plan for growth they will naturally fit into your business when the time is right. Remember this is your business, your dream, your vision. Many companies have tried to be all things to every customer that walks in the door or calls on the phone, only to fail miserably in the attempt. Nowhere in the creation of your business plan and the careful and thought-out development of your vision and values did it state that you would do everything for everyone. Don’t let outside forces drive you away from your well-thought-out plans for success.

Planned non-growth. Even though the normal assumption is that a profitable company is always growing, there may be times where a business may have planned non-growth. This could be due to the realization of preset benchmarks for equipment, personnel, or capacity. This could also be because of changes in the industry, re-evaluation and changes in action plans, or changes in the management or business structure.

Every business as it is created has a “life cycle.” Coming to the end of this life cycle may be another reason to have planned non-growth. For example, as was discussed in the section on succession planning, the valuation of a business needs to be determined when presented with ownership changes due to death, disability, or retirement. This would be an ideal time to have a specific plan for non-growth to allow for a stabilizing of all pertinent business matters associated with the company. This would then allow for a clear picture of the business’s overall structure, and provide a solid footing to make informed decisions, pertaining to the future ownership of the company.

Another approach to non-growth planning in a company may be in one area of the company as it pertains to the company’s progress as a whole. For example, if a company were planning a major shift in the business location or the type of freight they were hauling, that company may plan for a period of non-growth in equipment acquisition to support the other major changes mentioned.

It’s important to remember that planned non-growth does not mean stagnation of the business, loss of revenue, or “downsizing.” Planned non-growth is as much a positive business decision as planned growth is. Planned growth and planned non-growth should both be an intricate part of any overall long-term plan for success.