The Ripple Effect of SMB Stagnation and How to Avoid It - Part 1

In over 25 years as a growth leader across various sectors, I have come across countless examples of companies that are stuck in the Milk It phase of their journey.? This is generally defined as the phase when a business has reached a certain level of success and is content to maintain the status quo. The business is not growing or innovating and the management team is not planning for the future. This phase is perilous because, in business, there's no middle ground—you're either growing or dying. Stagnation is a death sentence in an environment where innovation and adaptability are paramount.

The Urgency of Growth in the SMB Sector

Smaller companies often concentrate too heavily on daily operations and maximizing value from their current products and services, neglecting the pursuit of new opportunities. This leads to stagnation and increases financial risk because such businesses are less attractive to banks and investors.? Consequently, it’s unsurprising that 70% of retiring small and medium business owners fail to find buyers, leading to closures. Given that SMBs employ half of all workers and drive 44% of our economy, the need for growth isn’t just a motivational mantra—it’s a survival instinct.?

Societal Impact Beyond the Business Sector

Serving on the board of Hearth Inc., an organization dedicated to ending homelessness among the elderly through outreach, prevention, and advocacy, has given me a unique perspective on the growing issue of financial insecurity among seniors. The number of homeless individuals aged 65 and above is expected to nearly triple over the next decade, underscoring the severity of this crisis. (See The Emerging Crisis of Aged Homelessness)

My fear is that the repercussions of SMB failures extend well beyond the business world. Many small business owners depend on selling their businesses to secure their retirement. When these businesses fail to sell, it leaves owners without the anticipated financial resources. With 78 million baby boomers nearing retirement, the impact may be significant. Insufficient retirement savings, exacerbated by rising inflation, are undermining financial stability.? This situation underscores the urgent need for a robust growth strategy for SMBs—not only for economic health but also for the well-being of our aging population.

The Role of Leadership

The responsibility to drive growth and innovation falls squarely on the shoulders of the business owner and their leadership team. It's their vision and leadership that will determine whether their company thrives or becomes obsolete. Here's a deeper look into some key drivers of business growth.

• Talent Acquisition and Development: A company's most valuable asset is its people. Hiring and retaining top talent and/or partnering with subject matter experts is essential for driving innovation and executing growth strategies. Investing in employee development programs ensures that the workforce remains engaged, motivated, and equipped with the skills needed to tackle new challenges.
• Ambitious Goal Setting: Across our entire portfolio of companies, we implement the OKR Framework to establish measurable, challenging yet attainable targets for each quarter. Setting bold, ambitious goals acts as a powerful motivator for both individuals and teams. By aiming high, companies cultivate a sense of purpose and excitement, encouraging everyone to push boundaries and achieve remarkable outcomes. These goals also provide a clear direction for growth efforts, ensuring that everyone is aligned and working towards a common objective.
• Embracing Risk and Innovation: Risk aversion can stifle growth. Businesses that are willing to take calculated risks and experiment with new ideas are more likely to discover breakthrough innovations. Consumers' preferences shift, technologies advance, and competitors emerge. Only those companies that actively seek out new opportunities and embrace change can thrive.
• Organic Innovation - Invest in research and development, explore new technologies, and continually seek ways to improve your products, services, processes, business models and customer experiences.??
• Growth through Partnerships and M&A - Consider strategic partnerships, alliances, or acquisitions to gain access to new capabilities, markets, and resources.
• Customer-Centricity: Understanding and meeting customer needs is paramount for sustained growth. Companies that actively listen to their customers, anticipate their desires, and adapt their offerings accordingly are more likely to build loyalty and drive repeat business.
• Data-Driven Decision Making: One of my favorite sayings is, "If we have data, let's use the data. If we only have opinions, then let's use mine." In our digital age, data serves as a treasure trove of insights. By leveraging data analytics, businesses can gain a deeper understanding of their customers, spot emerging trends, and make informed decisions that propel growth.

Conclusion

For business and SMBs in particular, growth is not just about expansion—it's about survival and securing a future for not only the business and its stakeholders but the overall economy.

Read Part2