moneyFYI
Financial Freedom Is Merely Organized Common Sense
Qualitative vs. Quantitative Growth
Every business has a right size. Probably several. You should discover these sizes and work towards them. Size is an important element of strategy.
Right-sized businesses are efficient. The overhead matches the output required. Near full utilization with a cushion. Quality is tested and proven. Procedures are known, training is easier, unforeseen events are fewer, there is depth and personal growth for employees. The business has price discipline and is cost-efficient.
Rightsize businesses seem to automatically know the difference between quantitative and qualitative growth. Growth for a purpose versus growth for growth’s sake.
If right-sized businesses need to expand, they often do so by acquisition. That is efficient. If they can’t do that, they run the risk of getting stuck between right sizes. They can solve this problem if they prepare and they know what they are trying to achieve. They have a time budget to grow to the next right-sized level and know the order to add the overhead elements. It is like going up stairs. Things are easy on the level parts harder on the riser.
Sometimes, but usually not for long, a manager who does not understand the idea, decides to grow to satisfy some ego-oriented thing. Growth for the sake of growth. They soon find that quantitative growth and qualitative growth are not the same thing. To their dissatisfaction usually.
There is a rule to remember when you are tempted to follow that path.
Pissing in the soup makes it bigger, but it is not as good.
Don Shaughnessy is a retired partner in an international accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario. don.s@protectorsgroup.com
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