Monday, August 15, 2011

On Growth

I have spent the last 20 years as a professional.  Instead of graduate school, I opted on going to the school of hard knocks to see if I could make a living.  In that time, I have swapped careers three times moving from radio to the casino business to finally winding up in the technology profession.   In that time, I picked up a little wisdom along the way.  I noticed that people who said one thing and did another were often rewarded for their deviousness.  The Peter Principle wasn’t just a fancy premise for an essay and that being a jerk was often forgiven if you made your monthly sales figures. 

I also learned a few things about the growth along the way.   Today, I want to talk about growth and how it will relate to my new firm.  The job of any business person is to grow their business.  A small business has to keep selling and growing in order to pay vendors and employees.  This simple formula of sales equaling growth quickly becomes complicated.  As customers increase, you have to hire more employees to service those customers.  The proper balance is how to keep customers happy while keeping employee costs down.  It is not easy.
Sorry, I am worried about growth not olives
I have witnessed a lot of funny things called growth which are fraudulent.  For instance, one company I worked for purchased regional competitors and other firms which provided the same service.  Sales increased but only because more market share was concentrated in the firm.  In many respects, it resembles building a house of beer coasters.  It looks impressive but it will fall apart the moment anyone pokes at the structure.  Which is what happened when bad weather affected the business, the share price of the company went from $33 a share to $12.50 and really hasn’t recovered in the eleven years since I left the firm. 
Another example, is fiddling with margins which boosts profits but really doesn’t solve a customer service problem.  I turn to the famous olive example, where an airline generated over $40,000 in profits by having fewer olives in its in-flight salad.  This is not growth.  It is accounting tricks and stiffing customers to create the illusion of growth. 
I plan to grow my business the old fashioned way with sales.  It will not be pretty but it will be honest and generate wealth and prosperity without all the smoke and mirrors.