Should You Grow Your Business? Ask These 4 Questions First
Before scaling, run your opportunity through these four filters.
There's a "Mount Rushmore" of questions business leaders ask each other. These are the ones that pop up like clockwork wherever two or more business owners or operators are gathered.
Among them:
"Should I let [insert team member completely misaligned with the company] go?"
"What's the best way to balance my time between work and family?"
"How do I get out of the weeds so the business doesn't depend on me?"
Today's topic is the 4th question:
"Should I grow my business?"
This question arose a few weeks ago at a meeting I attended. And while I have asked myself this question, I don't know, A THOUSAND TIMES, I realized I'd never really "put it to bed" so to speak, in terms of how I look at it.
So let's dive in! Here are the first (not only) four questions I ask myself when evaluating a growth opportunity:
1. Does it align with my personal vision?
I have two documents that define "my personal vision."
The first is a multi-page document describing my vision for my life 5 years from now. For example, my current document was written as a "journal entry" dated December 31, 2030.
It's rather long and detailed, but relatively simple. I describe my life as I envision it five years from now, in terms of personal, family, friends, work, and community. It took a few hours to write, and an hour or so to update each year.
(By the way, this document made writing my Master Prompt for building out my personal custom GPTs very easy.)
The second document is my personal EOS Vision/Traction Organizer (V/TO). I use Traction (EOS) in both my businesses and my personal life. (Here's how to set that up.) The V/TO is a two-page document that outlines your personal core values, purpose, mission, and what you envision your life to be like in 10 years, 3 years, 1 year, and 3 months.
Every opportunity to scale our businesses or undertake a new personal project is filtered through this lens. Will undertaking this next phase of growth move me closer or further from these personal vision documents? This is a tricky question to ask myself. Often, I want growth for the wrong reasons.
If a new opportunity is well-aligned with my personal vision documents, I then ask...
2. Does it align with my business V/TO?
Next, I filter the opportunity through my business Traction V/TO. (Here's how to get Traction started in your business...)
Once again, the question is: will this opportunity move me closer or further away from my 10-year, 3-year, and 1-year goals?
In this step, it's also helpful to convene a meeting of your business advisors. These are the people (internal or external to your company) who know you, know your business, and care about the outcome.
For me, this includes my wife, my business coach, my kick-ass business operating sister, and the members of our EOS Leadership Team within the company. Another layer of counsel I lean on is my EO Sacramento network. There are approximately 20 members of this group whom I'd consider consulting, depending on the topic and their availability.
At this phase, a multitude of perspectives is helpful.
3. Is your net profit sufficient?
Should a growth opportunity pass through both the personal and business V/TO filtration, it's time to evaluate the numbers.
Here's the magic question: Is the net profitability of the company considering growth more than 15%?
If yes, that means there is "room" to grow. Why is this important? Growth almost always drives net profitability down for a period of time. (Sometimes months, or, more often in my experience, years.)
Here's a straightforward growth management approach:
Improve like mad to get to a 15% net profit (increase labor efficiency, negotiate lower material prices, increase prices, etc.)
Grow, which drives profit down (let's say, to 10%)
Improve like mad (at a higher revenue figure) to get to 15% net profit again
Grow again (IF IT ALIGNS WITH THE GOALS!)
(I call these steps “profit islands.” Here’s more on that topic…)
PS: Net profitability is AFTER everyone working in the business, including you, is being paid a market-based wage for the work you do. Until then, your net profit is illegitimate and should be stricken from your conscience.
4. Does the prospect of growth energize you?
The last question to ask about a growth opportunity is whether the idea of it energizes you.
When you consider it, how does it make you feel?
In your mind's eye, when you are "in the middle of it," are you excited, grateful, and content?
Or are you miserable, regretful, and frustrated?
This can be hard to do, this imagining of our future feelings. But it's essential. We've all found ourselves in the middle of things that "sounded great at the time," but are far from it when in the messy middle.
Sure, many things worth doing are hard and unenjoyable from time to time, but be honest with yourself about whether these moments will be fleeting or substantive.
Run away if the latter.
Deciding when or whether to grow a business, start a new personal project, or invest in a new opportunity can be among the most challenging decisions. After all, some decisions are difficult or impossible to undo.
Alas, growth is only worth it if it aligns, funds itself, and lights you up.
Thanks for reading this post. I appreciate you. In return, please share this with those you know who may be interested.
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Things I’ve Enjoyed Lately: Anthony Bourdain's classic Kitchen Confidential holds up. It's the autobiography by the famed (now deceased) chef, TV personality, travel guide, and rule-breaker, wrapped in an industry biography. It's an engaging and, at times, disturbing look at the restaurant industry. Bourdain is a talented writer who does not hold back. For me, it was a perfect vacation beach read.