Member Sudhir Aggarwal Speaks: Not All Companies Are High-Growth
The Challenge:
The case at hand was brought to a recent Alliance meeting by an Alliance CEO who wanted to know how to double his company's sales in five years in order to sell it, even though the company had limited cash to put into growth efforts.
If you were in this situation, what would you do?
It doesn't feel good to think of yourself as a "˜harvester' and not try for growth. But trying to grow a firm that can't grow is folly.
I know how it feels to not grow as fast as you want to. A company that I was running was growing slowly, while my friends were growing firms at 30% per quarter! But the challenge you describe appears to be very difficult to achieve, perhaps too difficult.
You told us you could stop trying to grow and your business would be able to coast along for a least a few years and produce $20M in free cash. If I were in your shoes and it was my company, I would simply cut back hard on expenses and harvest the cash as "my" exit.
I would do so knowing that "my" company has a small market share and faces significant challenges, for example, given the isolated geographic location of "my" firm, I would not be able to find the talent I needed to grow. Second, being in my late 40s, if I tried and failed to grow the company I would end up having to start all over in my mid-50s.
Keep in mind that our duty as CEO is to make the most money from whatever business we run. Let's face it, some businesses just cannot be high-growth, and may actually be in decline. If that's the case, it's our job to pull cash out as they decline.
It doesn't feel good to think of yourself as a "˜harvester' and not try for growth, I know. But trying to grow a firm that has weak prospects is folly.
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