Growth Through Subtraction

The old adage that “you don’t get bigger by getting smaller” does not always apply in the modern world. In order to thrive in today’s fast-paced global marketplace you must think differently about what is essential to growth, and where and how to invest your time and limited resources.

Big corporations have gotten it wrong for decades. To artificially “pump up” stock prices and appease shareholders and the board of directors, they have historically downsized and reorganized during the fourth quarter to improve short-term financials. However, if you do not make fundamental changes to improve operational performance, this is a slowly bleed to death strategy that more often leads to failure.

“When you remove just the right things in just the right way, something very good happens.”—Matthew E. May

Most short-term actions taken by a struggling company tend to move it farther away from its growth objectives, while negatively impacting people, morale, services, etc. Don’t fall into this trap when your business encounters a bump in the road. There are better ways to lower expenses and improve performance than staff cuts, or a knee jerk reduction of services (i.e. marketing) vital to long-term, sustainable growth.

However, it will require more forethought and work on your part to accomplish. Below is a list of both the short- and long-term actions to consider if you want to accelerate growth, whether your business is thriving or facing a downturn.

  1. Eliminate the “clutter”. To ensure proper alignment of resources, take an in-depth look at the business from the inside out. Trim expenses and dispose of anything that does not improve revenues and profits, customer satisfaction, operational effectiveness, or productivity.
  2. Outsource services. Outsourcing can help to improve operational performance, reduce costs, gain entry to new markets, provide access to skilled labor and expertise, and free-up internal resources to focus on the core business requirements.
  3. Invest in your people. People and intellectual capital are the two greatest assets for any business. By investing in your employees you’re expanding the knowledge, skills and expertise required to improve productivity, fuel innovation and growth, while improving employee morale and retention.
  4. Retain high value/high potential customers. These two categories represent 50% of the customer base for most businesses, and 90% to 95% of the profits. A 5% improvement in retention can yield as much as a 25%-50% increase in profits.
  5. Drop unprofitable customers. Are you concerned about short-term revenues or profits? If profitability is your primary concern, then take a close look at your existing customer base, your gross margin targets, and get rid of any loss leader accounts.
  6. Place greater emphasis on marketing. One of the quickest ways to recover from a business downturn or to accelerate growth is by emphasizing marketing, not scaling back. Shift budget to areas that have historically yielded the greatest ROI, and away from under-performing programs and initiatives.
  7. Raise prices. Increasing prices is an effective way to improve both top- and bottom-line results. Why? Because increasing prices requires minimal resources to implement and the “net” profit returns are immediate. However, be careful that any pricing actions taken do not result in the loss of profitable customers.

Growth through subtraction should be applied to all areas of the business. This will help ensure consistency and optimization of budgets and resources. Subtracting those things that distract from your overarching goals will put you in the best position to achieve long-term growth and success.

Enjoy the journey!


COPYRIGHT © 2019-23 John Carroll