TechGenix Newsletters

TechGenix Newsletters

01.5.2015 Growth: Newsletter 16


Lead Article (Self-help topic – GROWTH)

Growth in a business often raises different opinions. Some people focus on growth in turnover; growth in staff; growth in outlets; growth in product lines…the list goes on. There is only one item I want to see growth in. Net profit. Some people focus on those other areas assuming it will deliver growth in net profit but the primary reason to be in business is to generate a profit and if that isn’t a focal point you can sometimes lose your way.

You can have all the grandest reasons for being in business but the primary reason must be profit. Without profit, you don’t have a business. I may sound like a mercenary but profit gives you the ability to change the world. Think about the Bill and Melinda Gates Foundation. It has a current endowment of $36.2 billion and has helped minimise polio and is currently turning toilet water into drinking water among countless other very noble projects. Bill can do this because he created a profitable business. OK – a very profitable business. My point is that in business first there is profit – everything else is second.

Growing profit is not easy. How does your environment change when you do grow? Do you need different premises or more staff? Can you find the correct staff to help you with that growth? Many times I have spoken to very small IT organisations – sometimes consisting of two partners or even as small as a one-man-band – and their biggest fear is employing their first employee. With growth inevitably comes risk and that is part of the thrill of being in business. You take a risk when you employ someone. You take a risk when you move into new premises. You take a risk when you spend money on R&D for a new product. The success stories are the ones when that risk translates into profit.

When businesses grow it often means that cash-flow can be tight or that additional funding is required. The sensible advice always says to use bank loans or an overdraft or factoring or other traditional means for financing your growth. There are times when these methods are difficult to obtain or lack flexibility. Many business advisers tell you not to let go of the ownership of your business but I completely disagree. The aforementioned Bill Gates only owned 20 per cent of Microsoft when he was ranked as the richest person in the world. Owning a small percentage of a highly successful company can be better than owning 100 per cent of a moderately successful company. Apart from the financial process of introducing partners to your business, don’t underestimate the value of the input a financial partner can add to the business – in particular if that partner is an employee in the business. Studies have actually found that majority employee-owned businesses typically have higher sales per employee. I go against the general business advice and I actively encourage businesses to take on partners and share in the success of the business with people who are engaged in the business.

One trait that I see in almost all businesses growing well is that the business makes decisions. To grow you need to adapt. You need to be nimble and make moves before the rest of the market does. If your business procrastinates over decisions or fails to make any decision, the business will keep plodding along. High-growth businesses not only predict trends but sometimes make trends. Never be scared to make a decision – and if it is the wrong decision, make another one (this advice doesn’t work particularly well when speaking with bomb disposal experts).

Tell me what aspect of growth you focus on in your business at md@smallbusinessrules.com.

Science Quiz Question

We generally understand that there is some force that we can’t see called gravity that ‘sucks’ us to earth and stops us from floating off into space. We also have been told that all objects fall towards the earth at exactly the same rate. That all sounds nice in the classroom and helps students answer questions in their science tests but in reality it seems to be complete rubbish. Anyone that has dropped a feather and a hammer will see immediately that items don’t fall at the same rate. Even if you take two similarly shaped objects (say a baseball and a tennis ball) surely the heavier object will fall faster? What tricks have those science teachers been playing on students? How can you possibly explain the theory versus the practicality?

Science Quiz Answer

First, to be technically correct, gravity doesn’t suck. Just to make sure I am giving you completely accurate information, there is a gravitational attraction between any two objects with mass. If you think you are attracted to your computer, technically you are correct. It just isn’t a very strong attraction. The gravitational force between two objects is directly proportional to the two masses and inversely proportional to the square of the distance between the two objects. Therefore earth doesn’t suck you towards itself there is actually mutual attraction between yourself and the earth. Now we have cleared up that technicality, we need to address the feather and hammer problem. When we try the simple experiment and drop a feather and a hammer in our backyard, the hammer hits the ground first. This is obvious even to the naked eye. In this instance, the surface area compared to the weight and lower density of the feather results in air resistance having a greater impact on the feather than on the hammer. Gravity is attracting objects towards it (depending on exactly where you are on earth) at 9.80665 ms-2 regardless of the weight of the object. That doesn’t seem to make sense. Surely a heavier object has a greater gravitational attraction. If someone gave me the choice of lying on the ground and having a bulldozer placed on my chest or a hammer placed on my chest, I would take the hammer as it would exert less force on my chest. That is correct, but a bulldozer and a hammer dropped from a given height (ignoring air resistance) will both hit the ground at the same time. The gravitational force is different but the mass is also different. Newton’s Second Law states: “The acceleration of a body is directly proportional to the net force acting on the body and is inversely proportional to the mass of the body.” This is commonly represented as F = ma. If we look at the acceleration as the subject of the equation, a = F/m. So the logic is correct that the force exerted on a heavier object is greater but the mass is also greater. If the bulldozer is 10,000 times heavier than a hammer then the force exerted on it by gravity is also 10,000 times heavier so the acceleration is identical.