This is all about growing your business. (I’m not sure what you were thinking…) I’m here to tell you that for most people*, when it comes to your business, bigger is better. Here’s why:
- The bigger you are, the more money and resources you have to try new things. And at some point, you have to try new things to grow. While many owners get more conservative as their company gets bigger, the reality is that the bigger you are, the more resources you have to make a big hire or invest in the development of a new product – take advantage of it.
- Business is changing so fast… the way people buy, the way people work, and so on. Training your team so they develop new skills is critical for the company’s success and provides a great benefit to your team. When you are bigger, you can invest in training. Not only do you have room in the budget for it, but you have enough people where the training costs are better amortized.
- The multiple that a buyer is willing to pay for your business goes up with size. For example, a business with $3 million in profits will sell for a 4-5x multiple (a sales price of $12-15 million). A business with $8 million dollars in profits will sell for a 8-12x multiple (a sales price of $64-96 million).
This is why many business owners that I know are obsessively focused on growth; both organic and by acquisition. They want to cross that threshold from the lower multiples to the higher ones because each dollar of profit is valued higher. (And this is why I spend more of my time working with companies that have growth potential whose sales and marketing efforts need to be improved.)
By the way, size is measured by profits and cash flow. A focus on revenue growth, instead of profit growth, usually results in more work and chaos with none of the above mentioned benefits (with the exception of some internet companies).
* Here is why I say “for most people”. Some business owners want a lifestyle business, which is a business that allows them to come and go as they please. Others just want to practice their craft their own way (a dentist for example). For these owners, the pains, struggles, and hassles involved with growing a business are probably not worth it.