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Managing Growth

Written by: Gary Silverman

Article Overview: When we look back at the excesses of a few short years ago the risk of rapid expansion becomes apparent. We are now paying it back. It didn’t take an astute businessman to question the seemingly endless development of cookie cutter strip malls that made any drive seem like the movie “Groundhog Day”. It wasn’t de javu but rather redundant development.

Managing Growth

Similar problems exists in the retail automotive industry. Territories were chopped up and new dealerships were shoe horned in between others. New stores came with costly real estate on the pads of shopping malls and main drags with facilities dictated by the factory, and we know how brilliant they turned out to be. The list goes on; Circuit City, Home Depot, Lowes, fast food, power center tenants like Bed Bath and Beyond, Ross, and...well you get it. This over saturation did not provide any real service to the general public, it cluttered the landscape, made commercial realtors wealthy and limited the profit potential of each one of the businesses.

We have learned just how important it is to have a realistic growth plan, one that limits risk and provides a proper return on your investment. A good plan may simply include internal expansion of existing facilities, addition of personnel, products, or capital expenditure improving productivity. Perhaps your company’s business model would work in other markets. Choose a market that has an existing potential for success and can be easily served or controlled. Just because a market has dynamic growth does not mean that you will succeed. You need to research the characteristics of the buyer, the culture of the community, prime locations, cost of doing business, and the competitive environment. It may NOT be a suitable fit. Perhaps you are a niche player that would have greater acceptance in small markets. You may consider franchising or licensing as an inexpensive alternative that can yield excellent profit margins with very little risk or capitalization. Do not abandon growth plans just because the market is contracting or recessionary. A good plan develops over time and you must be prepared to launch your plan and be up and running when the market turns to get in early in the cycle.

Expanding within your current footprint may be the best short range alternative. Consider the fact that the fixed expenses are already in place as well as the administrative and support personnel. Adding a few more people and equipment may provide the best return on investment. Consider a call center, business development department, or the addition of new territories You may consider dividing up larger, highly productive territories to get better coverage, add to your product and service offerings, add retail if you are a wholesale business or the other way around. Did you ever wonder how some bakeries or bagel stores survive? They sell their products to hotels, airlines, catering companies, restaurants, employee cafeterias, schools, distributors, and a host of other outlets. Can this be a means for your business to expand? Apple is a good example of a wholesaler getting into the retail business. Apple retail stores control the brand, marketing, experience, while eliminating competing products. This may be an alternative. Gather the most intelligent people in your compan,y regardless of their position, and establish a think tank. You will be surprised at the ideas that rise to the surface. Growth may also mean jettisoning low volume, low margin products or services and committing your resources to the winners. You decide!

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Article Tags: automotive industry, bed bath, capital expenditure, center tenants, circuit city, commercial realtors, competitive environment, costly real estate, dynamic growth, food power, home depot, improving productivity, internal expansion, niche player, personnel products, prime locations, profit margins, realistic growth, saturation, shopping malls



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