4 ms·

If a business is not growing, but you're paying all the bills and still making money, why is that such a terrifying situation? There are two reasons I can see

If a business is not growing, but you're paying all the bills and still making money, why is that such a terrifying situation? There are two reasons I can see for this fear. First, investors who are afraid to lose a lot of money that they put into the company. Second, leaders who are afraid to have to lay off a whole bunch of people because that's very painful. Are there other reasons that I'm missing? Seems if you're bootstrapped and hire slowly, it's easier to keep balance in this situation.

danieltillett 11y ago
While I agree 100% in the general desirability of bootstrapping and building a profitable business over taking investors money to build a growth machine, you do need to worry if you have taken investors money and have stalled. The investors will get rid of you as the CEO if you are not doing what they want you to do. If your company is not growing at the rate they expect they will find someone else who will be willing to do what they expect.
- TheOtherHobbes 11y ago
  But their demands may be unreasonable, unrealistic, and perhaps even self-destructively stupid. A number of companies have been killed because the original founders were fired and replaced by a more compliant team - who unfortunately had absolutely no clue how to run that particular business. I'm not a fan of constant growth demands. Companies can fake growth in any number of ways, especially after winning a round. Ultimately it's down to persistent paying customers - not transient customers, and not "users" - and sales/margins. Anything else is PR for potential investors. My conservative view is that it's fine to run a stable, profitable business without spectacular growth. You may get killed by the competition, but you're just as likely to be killed by the politics and finance of over-extending a business without a real case for it.
  - danieltillett 11y ago
    If all you demand is growth then that is what you will get - either real growth or something that looks like growth. Fake growth is none too helpful to anyone.
- venomsnake 11y ago
  > If your company is not growing at the rate they expect they will find someone else who will be willing to do what they expect. Graduated from Hogwarts probably. Because even CEO-s are sometimes bound by reality.
  - danieltillett 11y ago
    Yes, but investors are not :)
adevine 11y ago
Because, unless you're something like a utility that just keeps on chugging at a steady state, most large businesses don't just "steady state" - they either grow or die, largely because some other competitor will grow faster and eat their lunch. Think of Yahoo - when they stopped growing it was largely because companies like Google and Facebook did a better job of attracting users.
- ChuckMcM 11y ago
  Pretty much sums it up, if you are not growing some business it means your dying, because every business that isn't a state mandated monopoly dies eventually. Older more established companies will have parts growing while other parts are fading, that reinvention cycle is critical to staying relevant. If you're a one product company and your growth slows, and you aren't growing the next thing, it means you're now heading toward non-existence.
  - dvanduzer 11y ago
    I completely agree, but this might seem counter-intuitive to this forum, given the fundamental advice to new entrepreneurs: hyper-focus. Once a company reaches a certain maturity, it "knows" that it needs to diversify to some extent. But it's hard to generalize about diversification strategies because it's tough to agree on the right metric for company maturity. Too many of the historical examples we could use for discussion directly relate to changes in what the state has considered a monopoly over time.
- werqqr23 11y ago
  To me your Yahoo example seems to prove the opposite of your point - growth stalled and yet it didn't die. It not only employs thousands of people but also earns billions in profit.
  - jacques_chester 11y ago
    It doesn't get much press, so in the metric that counts (VC availability bias), Yahoo died. Microsoft's corpse has similarly been squirting billions of dollars of profit through its several layers of tombstones for decades now.
inthewoods 11y ago
Yes this is written by a VC for VC focused businesses where growth is the only metric that matters. Same for publicly traded companies.
- paulsutter 11y ago
  Just to clarify: If you look at the statements for a VC fund, you'll see at most 2-3 winners that provide huge returns, and another 42 zombies (returned between 0x and 3x), which have little impact on the fund overall. That's 42 tedious board seats, and 3 enjoyable board seats. Ask a VC, they'll say the problem is that limited investors tend to call portfolio CEOs at random, and ask for a reference. That's pretty much the only reason that they need to pay attention to the zombie companies. And that's why a company that shuts down is better than a zombie that just keeps living without growth. One less board seat to deal with. One less set of arguing founders. One less VP they need to help recruit.
  - inthewoods 11y ago
    Great points - also, since you have one less company, the VCs now have relationships with a bunch of potential new employees for their other companies.

danieltillett 11y ago

While I agree 100% in the general desirability of bootstrapping and building a profitable business over taking investors money to build a growth machine, you do need to worry if you have taken investors money and have stalled. The investors will get rid of you as the CEO if you are not doing what they want you to do. If your company is not growing at the rate they expect they will find someone else who will be willing to do what they expect.

TheOtherHobbes 11y ago
But their demands may be unreasonable, unrealistic, and perhaps even self-destructively stupid. A number of companies have been killed because the original founders were fired and replaced by a more compliant team - who unfortunately had absolutely no clue how to run that particular business. I'm not a fan of constant growth demands. Companies can fake growth in any number of ways, especially after winning a round. Ultimately it's down to persistent paying customers - not transient customers, and not "users" - and sales/margins. Anything else is PR for potential investors. My conservative view is that it's fine to run a stable, profitable business without spectacular growth. You may get killed by the competition, but you're just as likely to be killed by the politics and finance of over-extending a business without a real case for it.
- danieltillett 11y ago
  If all you demand is growth then that is what you will get - either real growth or something that looks like growth. Fake growth is none too helpful to anyone.
venomsnake 11y ago
> If your company is not growing at the rate they expect they will find someone else who will be willing to do what they expect. Graduated from Hogwarts probably. Because even CEO-s are sometimes bound by reality.
- danieltillett 11y ago
  Yes, but investors are not :)

adevine 11y ago

Because, unless you're something like a utility that just keeps on chugging at a steady state, most large businesses don't just "steady state" - they either grow or die, largely because some other competitor will grow faster and eat their lunch. Think of Yahoo - when they stopped growing it was largely because companies like Google and Facebook did a better job of attracting users.

ChuckMcM 11y ago
Pretty much sums it up, if you are not growing some business it means your dying, because every business that isn't a state mandated monopoly dies eventually. Older more established companies will have parts growing while other parts are fading, that reinvention cycle is critical to staying relevant. If you're a one product company and your growth slows, and you aren't growing the next thing, it means you're now heading toward non-existence.
- dvanduzer 11y ago
  I completely agree, but this might seem counter-intuitive to this forum, given the fundamental advice to new entrepreneurs: hyper-focus. Once a company reaches a certain maturity, it "knows" that it needs to diversify to some extent. But it's hard to generalize about diversification strategies because it's tough to agree on the right metric for company maturity. Too many of the historical examples we could use for discussion directly relate to changes in what the state has considered a monopoly over time.
werqqr23 11y ago
To me your Yahoo example seems to prove the opposite of your point - growth stalled and yet it didn't die. It not only employs thousands of people but also earns billions in profit.
- jacques_chester 11y ago
  It doesn't get much press, so in the metric that counts (VC availability bias), Yahoo died. Microsoft's corpse has similarly been squirting billions of dollars of profit through its several layers of tombstones for decades now.

inthewoods 11y ago

Yes this is written by a VC for VC focused businesses where growth is the only metric that matters. Same for publicly traded companies.

paulsutter 11y ago
Just to clarify: If you look at the statements for a VC fund, you'll see at most 2-3 winners that provide huge returns, and another 42 zombies (returned between 0x and 3x), which have little impact on the fund overall. That's 42 tedious board seats, and 3 enjoyable board seats. Ask a VC, they'll say the problem is that limited investors tend to call portfolio CEOs at random, and ask for a reference. That's pretty much the only reason that they need to pay attention to the zombie companies. And that's why a company that shuts down is better than a zombie that just keeps living without growth. One less board seat to deal with. One less set of arguing founders. One less VP they need to help recruit.
- inthewoods 11y ago
  Great points - also, since you have one less company, the VCs now have relationships with a bunch of potential new employees for their other companies.