12
Sep
11

Impatient for profit; patient for growth

The relentless pursuit of business growth can kill your company. There are countless examples of companies that found themselves in dire straits – or have completely imploded – because they were hell-bent on driving revenues and expansion at the expense of profit. Groupon is the latest poster child for “growth at all cost” addiction. The company lost $113.9 million in the first quarter of 2011. It needs another $750 million just to pay the bills while trying to get through yet another round of venture funding. Groupon wowed investors with staggering growth, but failed to build a profitable business model. By all indications, it’s too late for Groupon to change its business model or thinking.

Too often, the measure of a successful leader is based on the leader’s ability to grow a company. But compromising profit at the expense of growth is, and always will be, inherently dangerous. As I detailed in my book No-Compromise Leadership, the leader’s ultimate responsibility is to maintain balance across The Four Business Outcomes: productivity, profitability, staff retention and customer loyalty. Compromise one or more of the outcomes and the others pay the price.

Profit is proof that your business model works. Profit built on integrity, purpose and high values is proof that you are worthy of being a no-compromise leader. Profit shows that you’re paying attention to the company’s financial reality. A history of profitability shows that growth opportunities are consistently weighed against the potential risk. Generating profit in tough economic times shows that the company is capable of making and executing tough decisions.

Here are some no-compromise strategies to keep you impatient for profit and patient for growth:

  • Ego versus common sense: Great conquerors are consumed with expanding their territory. It’s all about how big they can grow it. But there comes a time when the great conqueror’s territory gets so big that it saps resources, becomes unmanageable and starts to break apart. It’s one thing to pound your chest and proclaim how many locations you have or that your company does millions in sales. But if the company is crumbling because expenses are out of control and you’re getting further into debt, it’s time to put the brakes on growth and get seriously impatient for profit.
  • Driving growth versus good decision-making: The relentless pursuit of profit is fertile ground for making risky decisions. Every growth decision must be weighed against the potential risk. Entrepreneurs especially have a high tolerance for taking risks by applying the flawed practice of “ready – fire – aim.” When a company puts growth above profit, questionable decisions will be made in favor of high-risk opportunities. True, there are times when high-risk decisions have to be made that will take the company into the unknown. And when those decisions yield extraordinary success, it makes for inspiring books. It’s the failures you don’t hear much about after the lights are turned off and the door is permanently locked.
  • Growth through financing/funding: Few if any companies can finance their way to profit. There’s nothing wrong with debt – as long as it’s manageable. But when your monthly debt service is consuming profit faster than the company can generate it, you’re actually stuck in the high stress cycle of “driving growth to pay off yesterday.” When you’re looking for places to borrow more money, you’ve already been in financial trouble for too long. You’re growing broke. It’s time to stop the bleeding because more growth is not the solution.
  • It’s what’s in your fuel tank: Profit is really an abstract. Profit is a measurement. Profit is not cash. I repeat, “Profit is not cash.” When a company gets impatient for profit and patient for growth, it is actually building cash reserves by turning profit into cash. This process is planned. It’s a discipline that many leaders, and especially entrepreneurs, prefer to avoid. If your current business is not generating profit, it’s time to reengineer your business model. And the reengineering begins by shifting your thinking so that you and your company become impatient for profit and patient for growth.

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Please share your thoughts with me about today’s Monday Morning Wake-Up. Click above to comment.

Neil Ducoff, Founder & CEO of Strategies and author of No-Compromise Leadership

Pass this e-mail on to your business colleagues, managers and friends. They’ll appreciate it.

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1 Response to “Impatient for profit; patient for growth”


  1. February 9, 2015 at 11:52 pm

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