We've all known from day one, all of us who founded the firm, that this was a long-term proposition. I remember talking about how we're the people who know the numbers. We've done the research. We know how long it takes for companies to grow. We know what percentage of companies grow, and at what rates. We laid it all out at that very first meeting.
And it's been a big help. We've referred back to that meeting from time to time and said, "We're about halfway there, and we're on the trajectory we want to be on, so don't panic and don't try stupid things." It was a well-thought-out plan. That doesn't mean we don't do stupid things, but we don't do them out of anxiety about not growing enough. We can look back and say, "We knew it was going to be like this."
INC.: It strikes me that all the discipline you talk about -- the financial controls, the status meetings, the conservative staffing -- suggests how incredibly seductive the goal of rocketlike growth can be. And how difficult it is to keep reined in.
BIRCH: Relaxing the reins, abandoning caution, has killed a lot more companies than it ever helped.
INC.: Isn't the temptation always there, though, to loosen up, to grow faster -- because it would seem to solve a multitude of problems that are deadening for a leader to face every day. If you grow like mad, then people can be rewarded more financially. There's more opportunity for advancement within the organization. It's easier to keep people happy. That's got to make the pressure for fast growth almost irresistible. Then there are the pressures from outside the company. We're coming out of a period in which there were no cultural reinforcements to do anything other than grow like crazy. That's where all the adulation was. The hyper growers were the rock stars of the '80s. The guys who didn't hold on to the reins, they were the ones with vision.
BIRCH: A lot of those superstars are struggling right now.
INC.: But in our world, that's OK. That's the way to fail. In the '80s it was OK to reach, to fly too close to the sun. What was not as OK was to find a nice reason able altitude to fly at. . . .
BIRCH: Our strategy was not to race for the sun or be on the edge, but to get there in the long run. I will never grow at the risk of destroying the company. And every bit of our research shows that more CEOs should think the same way. I'll admit the pressures to grow are great, as you say. Our financial information system has saved us more than once. Without it -- a clear set of indisputable indicators that the entire management team can see -- it would be much tougher to go back and say, "We have to hold off for a while."
INC.: Have you ever faced a situation in which, because other people have access to those numbers, you want to push the company to grow and they come back and say, "David, no. Look at the numbers." Does it provide a system of checks and balances?
BIRCH: Sure, it goes both ways. I might want to go do something, and someone will say, "We don't have the cash flow right now," or "If you do that you'll jeopardize the project I'm already working on." We might conclude that if I'm going to pursue my project, I'd better figure out some way to finance it, because the numbers show that bootstrapping it inside the company would be dangerous.
That kind of financial information makes it a lot easier to pull back when you're tempted to go after things, a lot easier to say no to certain kinds of business or certain kinds of clients when you can see the results would be dicey.
INC.: We're all acquainted with the personal drain a founder suffers in starting and building a growth company. All this stuff -- the financial information and the understanding of how growth companies really evolve -- does it reduce the wear and tear?
BIRCH: Somewhat. I don't think you ever avoid the wear and tear completely -- there's always so much to do; you're always understaffed, always cash short, always constrained, working 14 hours to keep ahead of the ball that's rolling down the hill. But I do sleep a lot better because I don't have huge anxiety about what the next six months is going to look like.
If you have a sense of control, you're much less likely to worry. The greatest thing you have to fear is the unknown. The more things you can know about, the less concern you have.
INC.: Let's look at this body of knowledge from a macro view for a moment. Are there new things you've been learning about growth-company behavior? For instance, can you tell us what industries now claim the largest percentages of fast growers?
BIRCH: What's extraordinary about industry representation among growth companies is that it's almost exactly representative of the world at large. In other words, what's extraordinary is that it's unextraordinary. There is no predominance of plastics or biotech or even high tech. There isn't any one industry that has a propensity to spawn growing companies. It's uncanny, the extent to which that's true.
INC.: What about size? Is there a disproportionate number of small companies in the group of 700,000 fast growers?
BIRCH: The size breakdown, too, is fairly representative. I think 88% of all businesses have 20 or fewer employees, and about 86% of growth companies are in that category. About 97% of all businesses have 100 or fewer employees, and about 98% of growers fit in that category. The size of growth companies is representative of the size of the business population at large. What's even more interesting is that they're not disproportionately young or old, either.
