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In our experience, most small business owners want to grow their corporations. There are numerous reasons to grow your online business, including (*5*)economies of scale. But some entrepreneurs—who could ordinarily grow their businesses—select to limit the growth of their enterprises. Why?
We have heard the mantra: You’ve to grow or die. Yet we have now found example after example of business owners who debunk this myth. Listed below are five primary reasons we have discovered why these entrepreneurs have decided to limit the growth of their businesses.
Related: Here’s the Secret to Growing Your Small Business
1. Time needed to achieve profitability
Latest businesses may take some time to reach profitability, as their owners refine the business model. In reality, we have now often advised entrepreneurs to ensure they’ve a profitable business model before growing.
If it costs you $7 in material and labor to make a widget that you simply sell for $5, you are not going to make up the difference in volume. We worked with a house healthcare service that routinely deployed caregivers who cost the company more in wages than the client’s bill rate—until we pointed this out to the owners. Obviously, you’ll be able to’t stay in business very long with a model during which you lose money.
2. Aim to not put financial stability in danger
When a business is throwing off sufficient money for the owner to achieve his or her financial objectives, many individuals resolve not to incur the additional risk related to further growth.
A conversation we had with the owner of an automotive body shop illustrates this. He explained, “My home is paid for, my cars are paid for, my river home is paid for, my boat is paid for, my jet skis are paid for and the constructing that houses my business is paid for. I actually have a life-style I like.
“Yes, I could grow my business,” this man said, “but that might mean opening latest locations. I’d have to make a major investment in equipment and buildings. That will be dangerous. I have already got every part I need; I’m not going to risk losing it.”
Related: How to Grow Your Business
3. Unwillingness to let go
We all know a implausible interior house painter. He likes to do wonderful faux finishes in high-end houses. He’s a real artisan. Nevertheless, he cannot or won’t delegate the painting to anyone else. He believes that nobody can produce the finishes he can. So, if he continues to insist on spending his days with a paintbrush in his hand, the size of his company will remain limited by his own capability.
Likewise, we all know a really successful concrete contractor. Growing his business beyond its current size would require delegating day-to-day decision-making authority to others. He would wish to install a level of management between himself and the primary staff. He’s unwilling to try this. Subsequently, he has made a conscious decision to not expand his business.
4. Avoidance of regulation
A small bank we all know reached 45 employees. At 50 employees, it might grow to be subject to the Family Medical Leave Act (FMLA) which carries significant recordkeeping requirements. The corporate president decided not to cross that threshold by selection to avoid the bureaucratic requirement.
A general contractor with 4 employees laid all of them off and have become a solopreneur because he was drained of coping with all of the paperwork required by having even a single worker. He told us that the cost of time to complete and manage payroll, taxes, staff’ compensation and other requirements outweighed the profit of additional manpower.
5. Wish to maintain sustainable growth
In some businesses, growth requires capital. Consider a business that has thin profit margins, and requires significant inventory and accounts receivable. A dollar of sales growth might use extra cash than it throws off in the first 12 months.
When that is the case, owners are faced with a choice to either obtain external financing or limit growth to a rate that the business can sustain through its own internal money generation.
Related: Scale Your Small Business