Many businessmen are satisfied with the level of business they maintain and prefer not to be burdened with the issues surrounding growth. Some probably prefer not to have to hire new staff, deal with the increased pressure of new orders and especially increasing income on which they might have to pay taxes.
To remain unencumbered by growth issues the businessman with no aspirations should avoid learning anything about the finance tools available. He should take special care to avoid discovery about the increased financial flexibility that may come from non-bank funders. He should never find out how other businessmen have successfully increased profitable revenues. New ideas are the first step on the road to perdition.
One reason not to use non-bank finance is the higher cost. A business with 20% margins will lose some margin charges. To avoid growth consistently, one should focus on the cost of the finance to the exclusion of the financial benefits. So a reasonable man will insist on getting bank rates, even though they're almost impossible to get. This is the sensible way to avoid the prospect of greater profits.
If you truly want to avoid growth, dear reader, do not ever learn about the conditions required by private asset-based lenders. There is some danger that the application process will be simpler and easier than you expect and could put you at risk of growing.
The proper attitude to maintain is summed up in this line by the British rock group Gentle Giant in a song some years ago: "Little man looks straight ahead and never crosses borders.” That’s the attitude to have if you want your business to stay as it is year in and year out.
Focus on doing things the way you have always done. Make no changes. Avoid curiosity as best you can. This is how to avoid the drama of an expanding business.
We especially want to encourage you to maintain the usual mindset of small to mid-sized business owners towards finance. The view tends towards finance as being glorified bean-counting. The finance function is simply telling the owner if there is enough money to do the thing he wants to do. If the money isn’t there, the owner waits until it is.
In a similar vein, one of the absolute best growth avoidance strategies is assuming that there wouldn’t be any capital available anyway. This is often true with the banks. But there’s more than just banks to work with.
If you really want to avoid increased sales, you should do what an astonishing number of businessmen do, and negotiate and sign a business deal before securing the financing part. You’ll generally be pleasantly surprised to learn that you won’t be able to complete the deal because you didn’t structure the deal to suit the finance, thus avoiding growth opportunities.
There are non-finance ways to dodge increased sales, too. A couple of anecdotal events come to mind from an earlier era. Chevrolet once introduced a new model they called the Chevy Nova. Delightful car, they said, and it probably was. And the executives in charge decided to sell the car into the Spanish-speaking market, thinking it was a good smaller car to introduce. Apparently the executives, who wore well-tailored suits, were not fluent in Spanish. So the rollout hit a pothole with the Spanish speaking buying public, who rightly translated Nova into “It doesn’t go.” Sales, it seems, didn’t go either.
And then there was the time when Gerber Baby Food wanted to expand into the African market. And so they began importing containerloads into African markets, with the happy gurgling baby picture on the label. It was probably a lot tastier fare than babies in Africa would have had up to that point. Except for a minor detail overlooked by the senior executives.
A lot has changed over the last couple of decades, but back then, literacy in Africa was not as robust. And the illiterate moms buying for their babes generally could identify the package contents by the pictures on the label. Gerber learned that this was an impediment to sales and gave a macabre new meaning to the phrase “baby food”.
But we digress.
From time to time we will consider growth avoidance mostly from financial angles, so that you can quarantine new ideas before they can infect your operations.
If readers insist on sending in questions about strategies for funding increased turnover, we will reluctantly address them. But really, there's no accounting for tastes.
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Doug Friedenberg is principal of www.jigsaw-capital.com, a firm specializing in structuring and arranging asset-based finance strategies. He sometimes forgets to avoid increasing his client base.