Growth for growth's sake is the ideology of a cancer cell, not a sustainable business. Yet, the myth of growth and market share persists. "Grow market share! You must be scalable!" We are told over and over, and profits will follow. "Horse hockey!" as Col. Sherman T Potter would say. This week Ron and Ed will share their thoughts on why this pernicious myth does far more damage than good especially in the professional service space.
Use these show notes to follow along with the audio:
Growth vs. Scalability: A Debate
Ron and Ed discussed the value of growth and scalability in businesses. They challenged the conventional wisdom that bigger is always better, citing examples of successful companies that chose to stay small. They pointed out that market share does not necessarily lead to profitability, and that growth can be a strategy, not a goal. The discussion was based on their disagreement with the widely held belief that businesses should always aim for growth and scalability.
Small Business Growth Strategy
Ron and Ed discussed the growth strategy of a firm, O'Byrne and Kennedy, and how they successfully reduced their customer base to focus on advisory services. They emphasized the importance of profitability over volume and shared experiences of companies that failed due to unprofitable growth, such as Starbucks. The conversation also highlighted the advantages of staying small, including the ability to pivot, build profit, and avoid bureaucracy. They encouraged listeners to question the growth mindset and consider the benefits of staying small.
Balancing Growth and Personal Life: A Conversation
Ron and Ed discussed the importance of balancing personal life with business growth. They highlighted the potential of "Mompreneurs" and the success of a company that increased prices without losing customers, resulting in a 9x increase in company valuation. Both agreed on prioritizing value over growth for sustainable business practices. They also discussed the success of Dr. Paul Thomas, suggesting that scalability was due to strategic addition of more doctors. However, they also emphasized the potential problems of company growth, including increased complexity and strain on relationships. They ended the conversation discussing the potential issues of over-investing in a company and the potential benefits of constraints driving innovation.
Embracing Constraints for Growth
Ron and Ed discussed a book titled "A Beautiful Constraint," recommended by a guest on their show. They talked about the concept of embracing constraints as opportunities for growth and improvement, using examples from a podcast they listened to and a book they considered. They also mentioned a third party who picked up their show on LinkedIn and a podcast about customer tax.
Small Company Advantages in Tech Era
Ron and Ed discussed the advantages of being in a small company in today's world. Ron emphasized that the benefits of being in a small company are far greater now due to advancements in technology and changes in government regulations. They also highlighted the potential of crowdfunding to generate significant funds. Ed pointed out that technology has made accounting more efficient and accessible for small companies. They both agreed that being a one-person outfit doesn't mean having to be alone and that many small business owners work with a portfolio of people and organizations. They concluded by expressing their opposition to occupational licensing and regulation.
Small Business Advantages and Customer Satisfaction
Ed clarified the author of a previously mentioned book, "Unreasonable Hospitality," and discussed its content. He and Ron had a conversation about the advantages of smaller businesses in customer retention and acquisition, criticizing larger businesses for neglecting retention. They also touched on the importance of measuring customer satisfaction, employee satisfaction, and cash flow. The conversation explored the concept of market share, the lifespan of businesses, and the balance between personal passion and economic viability. The segment concluded with a focus on strategy and not feeling pressure to rapidly scale a business.
Value Creation vs Market Share: Focus on Future Potential
Ed and Ron discussed the importance of value creation over market share for business success. They emphasized the need for businesses to focus on the future potential and innovation rather than just static market share. The conversation also touched on the potential loss of human interaction in technology-dependent businesses and the importance of face-to-face interactions. Towards the end, they discussed the concept of a long-lasting company as exemplified by many Japanese businesses. They also emphasized the importance of pursuing one's passions in business. Furthermore, they announced the upcoming guests for their show, including discussions on private equity in accounting and subscription-based legal services.
Bonus Content is Available As Well
Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.
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