If you are not growing, you are dying... - Business Leader News

If you are not growing, you are dying…

Pavlo Phitidis, entrepreneur, investor and Co-Founder & CEO of Aurik Business, shares a practical strategy to counter the corrosive effects of inflation on our companies and our state of mental well-being.

The white ant, otherwise known as a termite, it’s a formidable little creature with an impressive set of jaws. They eat wood at a voracious rate and do so through the inside, not on top. Spotting them at work is only discovered when your foot lands on a floorboard and crashes through. It earned the term “white-anting”, analogous to how unforeseen forces unravel and disassemble efforts to create, build and sustain whatever it is you are doing.

White-anting aptly describes the corrosive impact of inflation on a business. Having last seen sustained inflation levels, in tandem with their ugly partner, rising interest rates, over 44 years ago, most of us would be far too young to remember the antidotes and counter strategies we can deploy across our business to sustain and, in fact, grow during such periods.

In this series titled ‘The inflation white ant‘, I’ll share six practical strategies to counter the corrosive effects of inflation on our companies and our state of mental well-being. I’ll draw the insights from companies I work with and share practical strategies and tactics to counter the value destruction inflation brings and the growth opportunities it opens.

N.I.C.E economy

Sustaining your company’s value without growth is possible in a N.I.C.E economy (No Inflation, Constant Expansion). That period of relative economic privilege is no more and unlikely to return anytime soon. Let’s run some numbers to illustrate why.

A furniture manufacturer I recently visited ran steady annual revenues between £8.8 and £9.2m over the last five years. They enjoyed established suppliers and regular, reliable customers as a second-generation family business. It’s a competitive industry with almost 7,500 players in the UK alone and their 5% profit margin, pegged their valuation around £1.8m.

We discussed what lay ahead for the company, and growth was on the cards. I asked what the growth plan was, and the CEO spoke about the previous year’s growth strategy indicating more of the same ahead. The targets were set, anticipating revenues of 11m in the year ahead. I was left wondering how the growth plan from the previous year would yield this 22% increase in revenue, given that the last five years had primarily delivered stagnant growth.

Our conversation deepened…

Despite the owners being deeply committed to growth, the growth strategy took the form of a monthly conversation between them and their accountants. I also met several managers in the company too, and they seemed unaware of the growth strategy. Furthermore, the “gears that turn the growth engine” – marketing, sales, operations, administration, and procurement – were poorly coupled at a functional level. The teams across the functions often complained about the lack of coordination and integration.

On my calculation, closing out 2023 on the back of the current plan was likely to yield a company value, diminished by inflation, of £1.5m.

A few months in, we turned the talk of growth into the walk of growth. It was a collaborative effort and included the managers across all functional areas. They, in turn, had involved their teams. The voices from the business coalface across each function brought gold dust insights into formulating the plan. It also created alignment and commitment across the team.

Building and growing a business is akin to sailing a ship

You need a clearly defined destination to chart your course and plan your journey. You need a crew that knows when and what to do to ensure safe travel. Navigation is essential to keep you on track and not find yourself out at sea without food, fuel or water. Arriving at a destination is a measured and managed process, not serendipity or luck. With the destination set at a valuation of 5m, the changes in revenue, profitability and productivity were all measured, supported by actions that the team agreed would get us there.

Today’s economy demands fortitude and humility. Fortitude to boldly commit to growth, despite the negativity of the business environment. Humility to recognise that growing a business is like sailing a ship and onboarding your “crew” is essential to turn the talk of growth into the walk of growth.

Pavlo Phitidis is a seasoned entrepreneur and investor with over 30 years of experience building businesses across four continents. He co-founded Aurik, a company that has already helped over 3,000 established businesses achieve growth and value.