When it comes to size, there are clear parallels between evolution and business. It’s no longer the case that any single company can be too big to fail, more than likely what is required is that a company becomes too small to fail. Like large species, large companies are fragile by nature because they require large amounts of human capital, financial capital, and investment to see continued success.
In 2012, the Startup Genome Project conducted a study where they analyzed more than 3,200 startups and found that 74 percent of those businesses failed - not because of competition or bad business plans, but because they grew too quickly.
By failing - as defined in the study - these startups had massive layoffs, closed shop completely, or sold off their businesses for pennies on the dollar. Putting growth over profit was their downfall - they grew to apex predator size, but were too fragile to stay in business long-term.
Culturally, growth feeds our ego and social standing. But what if we begin to question this need to grow, to scale, to become the apex predator? What if the byproduct of success for our company isn’t growth, but freedom? The freedom to choose what to do next or the freedom to choose the path of becoming a more durable business at any size.
Success, then, ought not to be measured by quarterly profit increases or ever-growing customer acquisition, or even by your ability to create an exit strategy and leave with more than you entered with.
Instead, as Natasha Lampard of the internet conference WebStock says, you can focus on an "exist strategy", based on sticking around, profiting, and serving your customers as best you can. Your success can be measured by being profitable quickly as you stay small and build real relationships with your customers. Not because you’re an altruistic hippy, but because it pays off over time. Long-term, loyal customers will sometimes hang around for generations.
A better problem to solve - one that requires real ingenuity - is how to avoid dealing with everything that comes up by just adding more to the mix. Solving business problems by simply adding more is like putting a plaster on a cut. It might stop the bleeding, but it doesn’t deal with why you're bleeding in the first place.
If you figure out why you need more, you can come to better conclusions that might actually help both your company and customers. You can turn down growth that doesn’t serve your business. Maybe you can create and sustain a tiny business that doesn’t overwork you or your staff and doesn’t ignore customers and still profits wildly. Maybe instead of taking investments to grow, you can remain the same size.
If you want to start questioning growth, here are seven specific prompts that can help ensure we aren’t blindly growing to epic, yet fragile, sizes:
Why do I want a larger company?
How much is enough? When will I know when I’ve reached enough? What will change once I reach enough?
Does this growth or scale serve more than just my own ego?
How does this growth or scale better help or serve my existing customers or audience?
How will this growth or scale affect my profit?
What are the maintenance costs of saying "yes" to more growth or scale?
How does getting larger affect my daily responsibilities and how I want to spend my day?
When you start to question growth, and not just assume it’s always beneficial, you can start to weigh the real risks and rewards of scale.
Growth in business is not an unalterable law, it doesn’t have to inevitably follow success or profit. It can serve you to get too big to easily fit into the mouth of a predator, it can also be unwise if that size requires more food than you’re likely to find on an enduring basis.
Paul Jarvis is the author of Company of One: Why Staying Small Is the Next Big Thing for Business.
Image credits: vicnt/gettyimages