The benefits that come with being a growth-focused firm far outweigh the risks.
In our experience with certain clients, the concept of “growth” is occasionally perceived negatively. Establishing a growth strategy frequently takes a backseat to other tasks that are currently captivating leadership’s attention. When speaking with these clients about why growth isn’t at the top of their priorities list, these are some of the most common reasons we hear as strategic planning consultants:
- The firm will lose its culture if it grows out of its current size.
- Staff feel they don’t have time to recruit, onboard, and train new employees and that it is impractical to grow at a faster pace.
- Increasing revenue or any other monetary metric shouldn’t be the primary focus of a virtuous firm.
The most common of these three is the first point. Zweig Group’s strategy team once had a repeat client voice their concern regarding losing their culture in three separate planning sessions – once at approximately 50 employees, then at 150, and finally at 300.
While all of these concerns are valid, the benefits that come with being a growth-focused firm far outweigh the risks. Here are just a few of these benefits:
- Staying competitive. Being growth-focused allows a company to maintain or expand its market share, positioning it strongly against the rest of the market. Over time, this proactive approach can lead to increased sales and profits which can bolster the company’s market influence and capabilities over its competitors. Simply put, your firm is more likely to provide better services to more clients.
- Attracting and retaining talent. A growth-oriented company is an attractive place to work for ambitious and talented individuals. These companies often provide better opportunities for career advancement and development, thereby attracting and retaining high-performing employees.
- Greater opportunities. Growth-focused firms tend to explore the boundaries of their current market, leading to a wider array of opportunities. These can include expansion into new markets, the ability to offer additional services, participation in networking events, and access to a broader talent pool, among many others.
- Benefiting from economies of scale. Emphasizing growth can help companies lower their overall costs and increase profitability. As a company expands, it can take advantage of economies of scale that wouldn’t be available to it if it remained at its current size.
- Financial flexibility. Growth-oriented companies often have more options when it comes to securing financing for future projects or expansions. Lenders and investors typically favor businesses that show strong growth potential.
- Reducing the risk of business failure. Companies that focus on growth are more likely to be diversified, reducing unsystematic risk. Additionally, a growth mindset typically forces a firm to adjust with new market expectations. This ensures the company stays relevant and resilient, reducing the risk of business failure.
This merely scratches the surface as to the significance of growth and its role in mitigating risks directed at your company. Within our industry, there’s a large disparity between firms that are growing and firms that are maintaining the status quo. According to Zweig Group data, AEC firms in the upper quartile of gross revenue growth witnessed a substantial 37 percent growth over the past three years. A stark contrast to the mere 4 percent growth seen in firms in the lower quartile. During our work with these firms over those three years, one of the most common issues that was attributed to a lack of growth was an inability to recruit/maintain quality talent. Many of these clients weren’t able to maintain the workforce needed in order to handle the amount of work coming in the door. Slow growth, attributed to recruiting and retention issues, led to slower growth. By no means is this a self-fulfilling prophecy, but it is something AEC firms need to be cognizant of.
The solution to this cycle is an actionable strategic plan, based on a clear set of objectives, that the entire firm buys into – a plan that clearly communicates a path forward and how it will provide better opportunity for everyone involved.
Growth doesn’t just enhance value for shareholders; it broadens opportunities for all. For employees, it paves the way for better career progression, increases professional development opportunity, draws in higher-quality talent, creates additional jobs, fosters creativity/innovation, attracts more interesting projects, and bolsters your firm’s discretion in dealing with difficult clients.
Lastly, for those holding back from growth due to an anticipated downturn in the economy, an overly cautious stance more often than not just leads to missed growth opportunities. Based on the S&P 500, good times (bull market conditions) on average last a little over 6.6 years while bad times (bear market conditions) last on average around 1.3 years. The average impact of a bear market (-38 percent) is almost nine times less than the average impact of a bull market (+339 percent). Following the 2008 financial crisis, many analysts continued to call for an economic downturn all the way up until the pandemic in 2020. Assuming capital invested in your business would’ve had similar or equal returns to the S&P 500 index, you would have passed up an ROI of 451 percent. Very few people are able to time these events, and a majority of those who do are like a broken clock – they’re right twice a day. It’s always important to maintain a healthy balance sheet and manage your organization’s risk, but so is prioritizing your organization’s growth. Sit on the sidelines at your own risk.
If you’re interested in laying out a plan for growth but don’t know where to start, Zweig Group has a team of experienced professionals here to help.
Travis White is a strategy and operations advisor at Zweig Group. Contact him at twhite@zweiggroup.com.
