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Life Lesson – Growth is the Only Option

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Why is Growth so Important even for a Business?

All living organisms (except single cell ones) including us humans grow right up to the point in time when we die. Though growth often slows down and becomes restricted in its nature as organisms mature, they all still grow to some extent. Businesses are in fact living organisms because they exist because of and for us human beings. The one advantage they have is they can extend their life span well beyond that of any human being; they could in fact exist forever. One of the rarely discussed understandings of macro-economic study is that businesses and economies have the same requirement, whenever they stop growing they immediately go into decline. Unlike actually living organisms though economies and business that go into decline can be pulled back out of it by restarting growth. Though that is true it is tougher for a business to restart growth than it is for an economy.

Why Can it be Hard for a Business to Restart Growth?

The answer here lies in several factors.

First when a business tries to downsize it sends out a negative set of signals both to the marketplace as well as to the investment community. Consumers and buyers instantly see your attempt at downsizing as meaning that you are no longer capable of what you once were, thus they become ever more afraid of relying on that business for their future needs. So consumers start looking for other businesses that show signs of stability and even better growth as companies that are growing must by their growth intend to be there for the longer –term, thus growth businesses will automatically become the new preferred suppliers. Also when a business downsizes they show both the consumers and the investors that they have been and are poorly managed, if that were not the case they would have no reason to be downsizing. Add to that investors see a business that is downsizing a potential cash cow to suck dry, so those businesses that are publicly traded who downsize automatically attract those investors out to gain a quick return by bleeding anything they can dry.

When a business downsizes it also sends a message to its competition and its own employees; that message is that it no longer wishes to try to maintain the position it once held in the marketplace. Thus competitors start to eye the downsizing business as a target to take market share from. Employees see the downsizing as a sign that the business no longer cares to maintain its position and thus they see that their jobs are no longer secure, suddenly they have two options one to get as much out of that business as possible while they have their job, and two to start looking for a better more stable job.

Next factor is simple economics, when you downsize your economy takes a hit, but it doesn’t just lose the dollars you once paid those employees it also loses all those dollars generated by the economic activity your ex-employees are no longer making. Thus the hit to the economy is 5 to 7 times as bad as the cost savings you just earned. That hit to the economy further reduces the economy’s ability to buy new products, so your market now shrinks even farther, bust since you were the one to cause the problem it ends up punishing your business to a greater extent than that of your competition. So what happens is that you get yourself sucked into a trap that makes recovery even harder. Most times you see those businesses that started the downsizing effort continue it until they are gone, while their competitors that fought to grow actually end up winning.

The reality is that downsizing is seen as losing, and the world just plain hates a loser.

Can a Business Turn it Around?

Yes it can but it takes a major shake up at the top and a vivid signal that the business has decided to fight to regain its position in the market and return itself to growth status. This requires first a strong message being sent from its executives, followed instantly by actions that show it is fighting to regain its market, by focusing on producing products that meet and exceed the needs of the consumers, while creating economic stability for its current employees and home economy. Failure to do that will only result in the delay of its death. Surprisingly few businesses ever succeed at the turn around, without new ownership, or from the increased support of key existing owners, unless the market and the competition see that ownership cares, any turn around will be just a delay to the end.


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