When your expenses exceed your revenue, your startup may need to grow (or you need to take a serious look at your costs). When you're trying to attract investors, your startup may need to grow (investors love steep growth rates). When you're trying to achieve a critical mass that will create a foundation for expansion, your startup may need to grow.
In fact, many entrepreneurs adopt a version of the "location, location, location" real estate mantra, feeling the three keys to a successful startup are "growth, growth, growth."
But not every business needs to grow every year. Growth is nice, but sometimes you may decide maintaining the status quo, at least for the short term, is the right strategy for your business.
Here are five examples of why the smartest decision for you may be to NOT grow your business -- at least for now:
1. Your infrastructure won't support it.
Once you have key systems in place, additional sales should result in incremental increases in labor, etc., but still: unless all of your processes are automated or outsourced, greater volume creates greater workload. More inventory. More supplies. More everything--often including more cash flow problems, especially if you incur certain costs well before you receive payment.
Sure, you can beef up your infrastructure to handle additional volume -- but now might not be the right time. Maybe you need more time to build a great team. Maybe you need more cash in reserve. Maybe you need time to establish a more efficient supplier network.
Insufficient volume has killed many a business, but so has rapid growth. Costs spiral out of control, service and quality levels suffer, customer issues skyrocket, etc.
Make sure your foundation is solid before you try to grow too rapidly. You want your business to be a star in the sky -- not a comet that burns brightly and quickly fades away.
2. You still don't make a profit.
Growth can lead to profitability when your fixed costs are high and incremental volume makes an outsize contribution to your bottom line.
But if additional volume still leaves you running at a loss, the first thing you need to do is achieve profitability. If your cost per product remains at $110 no matter how many you sell for $100, growth is the last thing you need.
Take a step back and look at your costs. Streamline your processes. Strip out non-essential expenses. Focus on productivity, waste reduction, and efficiency. Find ways to add value that will allow you to raise your prices.
Otherwise, growth will only make you run out of money more quickly than you already are.
3. You want to maintain control.
Growth often requires capital (but not always; I built and sold a $45 million business without raising any capital).
Maybe you like the idea of raising capital. But keep in mind that taking on investors usually means giving up some level of control.
If you aren't ready to do that, growth might not be the right option. At least not right now.
4. You want to maintain your lifestyle.
When you're a startup founder, at least early on, you are your business. Customers want your time. Employees want your time. Vendors, suppliers, partners, etc. all want your time.
Grow, and your time will become even more precious, especially as your business struggles to absorb the additional volume.
If you're happy with your work/life balance, or you're happy with the level of risk you currently face, don't grow your business. Plenty of entrepreneurs maintain the status quo for some period of time; even if they do want to grow, they take the time to lay the groundwork to ensure eventual growth will not impact the lifestyle and level of risk they're comfortable with.
5. You want to work in your business, not on it.
Entrepreneurs are often told that to be successful they must work on their business, not in it. Successful contractors don't frame houses; they coordinate crews, prospect for new business, establish relationships with realtors and suppliers. They work on their business, not in it.
But that might not be right for you. Maybe you started a contracting business because you love to build things. Maybe you started a web development company because you love coding. Maybe you started a landscaping company because you love getting your hands dirty and working with a small crew to turn a backyard into an oasis.
If that's you, then growing your business may force you to do a lot less of what you love, and a lot more of what you don't.
What matters is that your business fits your interests and your goals.
If growth doesn't support your interests or help you achieve your goals, deciding not to grow might be the best decision you can make.