Growth III

(November 7, 2004) - Creating jobs means growing a business. Growing a business involves understanding customers and their needs. Once the investment question is digested (see Friday's article), the mechanics can be started. As we pointed out, it's not always easy to get past the basic investment facts. Growth is limited by the company's ability or willingness to invest.

The second rule of thumb is: Marketing is the root of all income. Marketing is where job creation begins. It is where business growth can be planned and executed.

In solidly technical shops, there may not even be a marketing department let alone the organizational discipline required to harness the work and insights. For the lucky few who survived the crash as technical houses, growth presents the predicament of integrating and digesting a marketing function. It's enough to provoke the gag reflex in a good technical entrepreneur.

In terms of growth planning (and execution), Marketing is nearly a science. The methods and processes used to develop and define a new business are the very same tools used for growth. The difference is that the business plan for growth can be developed to harness existing opportunities. In other words, by reusing some of the firm's existing capabilities, the actual capital outlay can be reduced thereby producing a higher than market average return.

The trickiest single question involves the horizon line for the investment payoff. Again, bootstrap entrepreneurs have a particularly myopic view of investing in their own businesses. We've heard (and occasionally participated in) the general pooh-poohing of the Venture Capital model (invest in ten betting that two will pay off). Unfortunately, VCs are the only clearly established social mechanism for executing predictable growth. It's terribly difficult for small business owners to grasp the fact that they are faced with the exact same set of equations facing the VC.

The growth method is simple and predictable (although it may vary a bit in large contract oriented shops). Marketing has to survey existing and future prospects, define products, spreadsheet costs and adoption rates and present a business case to the management team. It takes time, hard work, disposable investments in planning and a management team that is ready and willing to make a decision and invest.