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Business Wisdom: Grow Carefully

Remember that time that Starbucks closed 600 stores?

The coffee giant spent much of the last decade growing to be one of the largest and most profitable food and beverage companies in the world. There was, it seemed, a Starbucks on every corner. In some cities like Vancouver, you could even find two Starbucks outlets on the same corner. But in 2008, reality caught up with the company: Starbucks began the process of closing 600 stores, putting more than 12,000 people out of work.

Obviously, Starbucks is still operating, but the company learned a painful lesson that year: Growing a business is good, but growing it too quickly can have disastrous results.

We’ve been studying some of the elements of business money management that parallel with the elements of personal financial wisdom found in the Bible. It’s important for business owners to watch their corporate expenses, for example, and to use budgets to plan their companies’ finances. Today, we want to look at another principle that can help you build a business the right way: When you grow your business, grow it carefully.

It’s easy to get excited about business growth. If you run a business, and you begin to see some success, the entrepreneur inside of you is going to get a thrill and see new opportunities to expand your operation and (hopefully) make more money. But if you don’t plan your growth carefully, it can easily backfire on you.

In the Bible, Jesus told a parable that helps to illuminate this principle a bit. Let’s look at the short teaching found in Luke 12:16-21:

16 And he told them this parable: “The ground of a certain rich man yielded an abundant harvest.17 He thought to himself, ‘What shall I do? I have no place to store my crops.’

18 “Then he said, ‘This is what I’ll do. I will tear down my barns and build bigger ones, and there I will store my surplus grain. 19 And I’ll say to myself, “You have plenty of grain laid up for many years. Take life easy; eat, drink and be merry.”’

20 “But God said to him, ‘You fool! This very night your life will be demanded from you. Then who will get what you have prepared for yourself?

21 “This is how it will be with whoever stores up things for themselves but is not rich toward God.”

Obviously, this parable is making a larger point about money — that if we spend our energy storing up things for ourselves, instead of pursing the riches of Christ, that we’re bound to lose it all. But we can also learn a more specific lesson about business here.

The farmer in this parable found himself in a situation that is familiar to many business people: He had a great success on his hands, but his operation was not sufficiently scaled to handle it. He made a good decision to grow his operation by building larger facilities. But he erred by assuming that his previous success and his new expansions would take care of him for the rest of his life. He wouldn’t have to do much real work, and the business would keep on growing.

I don’t want to stretch this analogy further than it really goes, but I do hope that you see that this parable gives us reason to be cautious in the ways that we grow our businesses. If we are doing the right things and serving our customers well, growth is going to happen. If we plan well and grow wisely, that growth can become the foundation for widespread success. If we get caught up in our growth and mismanage it, though, we can see everything fall to pieces.

So what are the pitfalls of business growth? Small business experts can teach you much more about those things than we can, but we see obvious trouble in practices like going in to debt to expand a business, hiring employees when you don’t have enough revenues to pay for them, building a business based on consumer fads, or over-saturating the market with your products, services or locations.

If you’re a small business owner in growth mode, we encourage you to carefully study the best ways to expand your company without spreading it too thin. When Starbucks expanded too much, too quickly, it had to close a bunch of under-performing stores in order to keep the company on track. Fortunately for coffee drinkers everywhere, Starbucks was able to scale back without doing too much damage to their business. If you make the same mistake, however, you may not be able to recover so quickly.

——

Photo by Jim Bahn. Used under Creative Commons License.

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Trackbacks

  1. […] finances. We’ve talked about the importance of watching expenses, using a budget, and planning for growth carefully — all concepts that are as applicable to our personal lives as they are to our business […]

  2. […] our business decisions. We’ve discussed controlling your expenses, using a detailed budget, growing carefully and saving money for emergencies. Today’s lesson is a lot like the last one: For long-term […]

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Copyright Brian Jewell, 2011-2013

All of the contents of this site and its posts are copyright of Brian and Laura Jewell. Any redistribution or duplication of this material, without the consent of the authors, is strictly prohibited. Instead, please feel free to link to us. Thanks!

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All content on this site is given on a general basis and is intended for informational use only. The content does not reflect any professional legal, investing, accounting or tax advice, and should not be used as the sole basis for making financial decisions. Always consult a certified financial professional before investing.
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