Financial Times

To grow or not to grow: Choice for small businesses
By Nilooka Dissanayake
To some, this question may seem strange. To many, the need to change will seem inevitable. They will argue that growth is inevitable if the small business were to flourish; that unless you grow, at least at the rate of growth of competitors and the market, the business will become a Lilliputian among Goliaths.

However, the small business, by the virtue of its existence revolving around an individual entrepreneur, will be subject to the whims and fancies of that individual as much as to the market and external forces. This is one point by which micro, small and medium businesses differ from large organizations and quoted companies.

Consider the pressure of external forces. It is obvious that unless we keep growing and innovating, we will be at a disadvantage vis-à-vis competition. We will find it difficult to retain existing customers when competitors offer them better choices. To take an example, many pressures will play in the minds of the shopper until she decides to switch her business from the corner grocery to the super market or the self-service shop nearby.

Even solid customers who remain with you will sit up and take note if your market share is slipping and the customer base eroding. The grass is always greener on the other side. And they will begin to wonder why everyone is switching their custom.

In the same way, your employees will be lured away by the competitors who offer better prospects, better working conditions and a more dynamic working environment. These factors alone will make it obvious why the small business needs to keep on growing.

On the other hand, take for example a few home-grown business groups. Consider MAS Holdings, Siddhalepa, Jinasena, DSI, and ODEL to name just a few. They all had very small beginnings. Some have grown to achieve international recognition. Others are operating in local and international markets. All have grown in many respects; in size, type or range of products and services, geographical markets, profits, turnover and the number of employees. Then think of the many small businesses that began at the same time as these and operated in the same industries. Where are they now? What happened to them? Did they close down or decide to remain small? Was it a conscious decision to remain small or were they compelled (to be small) by external forces? In studying growth, would it not be interesting to find out why?

Some entrepreneurs decide to keep their businesses small; their branches to be few. They may also wish to keep things in the family, have better control or be in touch with their customers. They may prefer offering personalized service rather than increased volumes. They may wish to remain regional or local.

We are however, looking at those who wish to grow. Often, small business operators express their desire to grow. But, if you quiz them as to how, or in what terms they wish to grow, they do not seem so clear as to the destination.

There are many ways to achieve growth. You could grow in terms of sales volumes, number of customers, number of transactions or the number of employees. You could grow in terms of geographical markets by moving from being a regional business to a countrywide operation or even seek out new markets overseas.

You could grow from being one product or service company to be a multi product or service company. You could also add on other related or unrelated products and services to your existing range. You could grow in terms of capital investments that lead to enhanced operations. Or, you could grow simultaneously in the many ways mentioned above. Often, businesses will grow in many areas together because growth in one area will lead to the need for expansion in other areas.

Whatever the route you take, your growth will not be meaningful unless matched with increased profits. And, you need to have a strategy for growth. You need to know the direction clearly. You are sure to end up in trouble otherwise. In the coming weeks we will look at growth and growth strategies for small businesses. We will explore the many definitions of growth and walk you through the many routes that will help you achieve that growth. Are you trying to grow your small business? What issues do you face day-to-day in seeking business growth? We would like to hear from you. Send us the issues you face and help us make the articles more meaningful to small business operators. You can contact us on ft@sundaytimes.wnl.lk or on 5-552524.

The writer is the Managing Editor of Athwela Vyaparika Sangarawa (Athwela Business Journal), the only Sinhala management monthly targeting the small and medium enterprises and its English version, Small Business International magazine and www.smallbusiness.lk, the bilingual small business website.

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