Growing and shrinking your business: you can buy arms and legs

Every business site is crammed to the gills with blogs and articles telling you how to plant the right seeds for growth or nurture your growing business – after a while you’re not sure if you’re reading a business article or watching Gardener’s World!

Knowing how to grow your company is important, of course. But what tends to get left out of the equation is that your business can also shrink (shock, horror!). In fact, there are plenty of businesses that spend their entire life continually growing and shrinking – and we have a client who fits this bill; a dynamic company that’s achieved some highs and battled a few lows.

A volatile business model

Our client’s business is a very volatile one. Some months they can be very busy and the next month it’s like a ghost town. What they do is highly specific, very technical and definition of ‘niche market’.

Due to the unpredictability of the business, they’re very cautious about growth and were working under the assumption that they needed to recruit a whole person to take their next tentative step towards expansion. So they came to us and asked the question; ‘Do I recruit a salesperson or do I recruit an admin resource?’.

Growing your team, limb by limb

Now, in an ideal world, where cash flow was no issue, they could do with both a salesperson AND an admin person. But for a volatile business like theirs, cash flow won’t support this. So, how does a dynamic business find the right people, while reducing the risk?

The answer we gave them was to buy an arm and a leg of both roles!

‘That’s ridiculous advice’, you may be thinking, ‘who ever heard of buying part of a salesperson!?’. But in the 21st century recruitment market, the world is full of freelancers, contractors, interns and students, all of whom would happily sign up for one day a week as your salesperson. Thinking in terms of ‘9 to 5, 5 days a week’ as your only employment option is outmoded these days.

When you’re running a dynamic business, like our client, the answer is to take on the separate ‘arms and legs’ as and when you need them. Not only will you be able to run a little faster (and keep more plates spinning) you’ll have done this with only a marginal increase to your payroll.

Chunking up your growth issues

Part of the challenge of growing is breaking it down into smaller manageable chunks. As the saying does, ‘How do you eat an elephant? One bite at a time’… possibly with plenty of ketchup.

First off, you need to understand what your challenges are:

• Do you need more time to reach your key goal?
• Do you need to bring in more sales to raise the profits needed for growth?
• Is there a key risk in your business model that could spell disaster?

Let’s take our client’s company as an example. They have one huge risk that’s already inherent in their business model. To do their highly technical, specialist work, they’re dependent on an old piece of kit. If this equipment broke down, they’d be stuffed!

No kit = no work = no income.

So, how could they de-risk it? Here’s how they approached it:

1. They’ve bought an old machine (in pieces) AND some spare parts. So now they could fix their old bit of kit if it went wrong… and they could do it during any downtime.
2. They’ve saved hard and, over time, they’ve built up a small cash pile. So, if the need arose, they could pay someone to fix it.
3. They’ve almost rebuilt the machine in step 1. BUT what they hadn’t thought about is that once they’d rebuilt the machine they can afford to reduce the cash pile in step 2.

So, not only have they got a Plan B if the equipment breaks, they’ve also freed up some cash to put into other growth plans… buying more arms and legs, for example.

Offering the benefit of experience

Another thing to consider: you don’t always need to offer people money to join your team.

Sometimes the benefits of experience and opportunities are far greater than cold hard cash. I suggested to our tech client that they approach universities to see if there are any students who’d be interested in some work experience or flexible working.

That kind of arrangement benefits both parties: the student gets some experience from the ‘grey hairs’; the business gets an extra pair of hands; and in the long term it may create opportunities for everyone. If the business grows, this student may become your next employee or a useful contact and advocate as their career accelerates.

Know the right way to grow

Learning how to grow the business is important, as we’ve said. But it’s also useful to think about how you would shrink and downsize if the need arises.

If your business is sailing through some uncharted waters, it’s always good to know the right time to shrink…and when to put the emergency plan into place. 

Who are FD Works?

We’re a forward-looking accountancy firm based in Bristol and Bath. We provide ambitious businesses with hands-on finance support and FD-level strategic advice.