Advantages & Disadvantages of Limited Growth Strategies

Earl Butz, USDA secretary during the Nixon administration, famously told farmers to "Get big or get out." His words referred specifically to the agricultural sector, but they reflect a reality common to virtually every economic sector: economies of scale directly improve profitability, and a company that isn't growing may likely be stagnating. However, small business owners may choose business models geared towards quality rather than quantity. Although this approach is not mainstream, it can nonetheless provide a stable livelihood for an independent, free-thinking entrepreneur.

Economies of Scale

A limited growth strategy restricts your ability to take advantage of economies of scale, or savings that kick in as your company grows and begins handling additional volume. Restraining company growth may hinder your ability to receive discounts by purchasing inventory in bulk, or it may restrict you to inefficient production systems because you never produce enough to achieve momentum. The more your company produces at once, the smaller the percentage of time and money you dedicate to peripheral processes such as waiting for equipment to warm up and cleaning your facility at the end of each day.

Investment and Growth

Growing a business takes money and time. Many companies finance expansion projects by borrowing money from banks, credit card companies, or relatives and investors. Businesses that choose not to aggressively grow are more likely to meet day-to-day costs out of operating capital, avoiding the expense and the stress of incurring debt. Successful growth strategies, however, enable companies to pay off borrowed sums while also developing a sales volume that yields increased profit in the long term.

Excitement and Innovation

Innovating and growing a business is an exciting and engaging process. You bring creative energy to the endeavor and, if you are successful, you reap emotional as well as financial rewards as you see your business grow and mature. Although limited growth strategies do not invest time and creativity specifically in growth strategies, they may nonetheless stay interesting and exciting if an entrepreneur stays engaged in developing strategies and innovations that help his business become more profitable without necessarily growing bigger.

The Big Picture

The relative advantages and disadvantages of a limited growth strategy ultimately depend on your long-term goals. If you have founded your company with the overall objective of making enough money to feed yourself and your family without working too hard, then a limited growth strategy may help you achieve these ends and achieve a sustainable sales volume. If your overall objective involves earning as much as possible or growing your company and then selling it for an attractive sum, then you're better off investing in growth.