The Business Book

4444

NOTHING GREAT

IS CREATED

S U D D E N L Y

HOW FAST TO GROW

O

ne reason many new

businesses fail is, perhaps

surprisingly, because they

grow too fast. Excessively rapid

growth can cause companies to

overreach their ability to fund

growth: they simply run out of cash

to pay for day-to-day operations.

A major challenge for any manager

is to balance income with

expenditure, ensuring that there

is sufficient cash to meet the rising

costs of the business.

In 2001, business professors Neil

Churchill and John Mullins created

a formula for calculating the pace at

which a company can expand from

internal financing alone. Known

“Grow or die”

thinking can lead

to overtrading and

business failure.

Nothing great is

created suddenly.

When the market

is growing, a company

must grow too...

...but that growth

must be balanced

and controlled.

IN CONTEXT

FOCUS

Business growth

KEY DATES

1970s McKinsey & Company

consultants develop the MABA

matrix to help conglomerates

decide which divisions to

grow, and how quickly.

2001 Neil Churchill—professor

at INSEAD business school,

France and John Mullins—

professor at London Business

School, UK—write How Fast

Can Your Company Afford to

Grow, introducing the self-

financeable growth rate (SFG).

2002 Toyota announces plans

to be the world’s largest car

producer. Eight years later, after

recalling more than 8 million

cars due to quality issues, it

admits to growing too fast.

2012 Edward Hess writes

Grow to Greatness: Smart

Growth for Entrepreneurial

Businesses, describing growth

as recurring change.