How to Grow? Don't Gun the Accelerator
We've had the good fortune (and good taste!) this year to work with a start-up ice cream company. For most of the year, they've been in a "grow or die" scenario, as most start-ups are. They needed to get past a critical point with their customer and distribution base to maintain sales and create a sustainable business. They've had some much-needed success with a major retailer and are looking at their next investment choices.
We write a lot about how to grow. As leaders of growing companies, most of you know what we mean. Growth is not about gunning the accelerator. Going as fast as you can usually results in spectacular crashes. Instead, growth companies need to think about how to strategically manage growth and create a sustainable upward trajectory where they can invest resources and capital to achieve the next plateau before moving forward.
When our ice cream start-up got the opportunity to launch in a major retailer, they were at a critical stage. The company needed to show a successful increase in sales over a period of time to maintain their shelf space and prove that customers were willing to buy and re-purchase their ice cream. This proof of concept was important, not only to maintain distribution at the retailer, but to show other retailers that they would be an attractive addition to their freezer.
Fortunately, the start-up has seen a consistent level of sales, especially in a core group of stores within their primary customer demographic. In our assessment, they've established a beachhead that is sustainable and defendable. Given the sustainable business they've established, they're now out of crisis mode and can focus on making the business more profitable.
From this position of strength, the company can also embark on low-risk growth experiments. They can test their product with new retailers or in new geographies. They've already identified a number of new opportunities for distribution in new geographies. They've prioritized each and are taking a measured approach to growth. If the experiments fail--and many will--they can more easily retrench back to their core to try again and learn from their experience. Eventually, they will naturally find a formula for success that they can use to expand their beachhead.
Send us your questions and experiences about using experiments to drive your growth. We can be reached at firstname.lastname@example.org.
KARL STARK AND BILL STEWART | Columnist | Co-founders, Avondale
Karl Stark and Bill Stewart are managing directors and co-founders of Avondale, a strategic advisory firm focused on growing companies. Avondale, based in Chicago, is a high-growth company itself and is a two-time Inc. 500 honoree.