Not just for size. New perspectives on growth

How much and why

Growth is relative to who you are and what you want – growth has to be relevant to your view of the way your business should be. We talk to clients about this a lot.

Within our mandate, we see growth as the servant of health for a business. It’s not what you’ve got, it’s what you can do with it. In essence, this is the covenant we offer.

Of course, growth is most often regarded as being synonymous with size, with just being bigger, having more of things. Particularly the bankable stuff. ‘In this life, one thing counts/ In the bank, large amounts.’ (from Oliver, the musical).

This is because ‘more’ (or less) is the most convenient way to measure the result of business activity, a simple first indicator that you may be doing the right things and doing things right. It becomes particularly useful where an evaluation has to be made of the future of a business and the capability of its management; for the appreciation of investors or banks or possibly stock markets.

More comprehensively, you can look to define healthy growth in the constitution of your business, in its processes and systems, in its spirit and confidence, the extent and strength of its capabilities, its sustainability, its ability to adapt to change or recover from adversity, its potential to do new things in new ways.

So a framework for thinking about this is useful – a way to get focused on how to think about the task. We believe that a brand and design business that wants to sustain the healthy growth system just described – that wants to keep up with time and change, and continually compete successfully in the market – should aim to increase its turnover two-and-a-half times every five years.

Conversely, extended time without growth can be a deteriorative factor, which we see showing through in various aspects of our research, both in analyses of performance data across the industry and in hours of discussion with agency owners and managers. Without progress, the impetus for growth wears away and the probability of it decreases in parallel.

Growth is relative to who you are and what you want – growth has to be relevant to your view of the way your world should be.

Figures for economic growth in the UK, 1949 – 2011, from the Office of National Statistics, show recessions twice in the 1950s and then in the mid-1970s, 1979/82, 1990/92 and 2008/10.

Figures issued by the US Bureau of Economic Analysis for US Corporate Profit Margins show the US economy in recession in 1961, 1971, 1974, 1981/82, 1991, 2001 and 2008.

So we can see, in the past sixty years, wide-spread and dramatic changes in economic conditions, from growth to recession, on a regular ten-year basis.

Work carried out by Donald Dony*, a respected Canadian analyst looking at a wide range of indicators such as the rises and falls in interest rates, stock, bond and commodity prices, inflation, GDP and property values and economic performance across transportation, technology, services, capital goods, basic materials, raw energy, defence, consumer staples, utilities, financials and consumer cyclicals, has identified a Standard Business Cycle of approximately four years.

That’s every four years even within the overall ten-year boom and bust cycle detailed before. And we’re still assessing the possible impacts of a British exit from the European Union, which we may come back on in due course.

As much as any b2b service, the brand and design industry knows the buffeting effects this history can have. Many consultancies are ill-prepared for these conditions, growing and deflating in lock-step with the cycle, at the mercy of every twitch in external forces, sometimes ending in stagnation and eventual decline.

A belief in paying attention to the systemic health of your business – a core focus on building a natural, creative, daily dynamic to achieve healthy growth, aiming for a two-and-a-half times increase every five years – will put you in good condition to sustain your position beyond those threats.

At the same time, you want to be able to produce viable operating income, maintain the value of your assets, sustain profitability, show a good return on capital invested and deliver a satisfactory return to the shareholders.

What else is important? Attract wonderful clients with projects that offer exciting design challenges. Keep the business fresh with new and varied design opportunities. Hold onto talented people and find more of them. Give young people the chance to learn and grow. Pay people well. Reward special achievement. Keep key managers committed to the business. Be able to invest in new technologies and new directions. Refresh and improve the quality of the work environment.

Feel confident more often, rather than less.

*Donald W. Dony FCSI, MFTA, is a professional technical analyst and holds the top global designation of Master of Financial Technical Analysis from the International Federation of Technical Analysts. Mr. Dony is the first in Canada to achieve this prestigious designation. He also holds a Fellowship from the Canadian Securities Institute since 1987 and is a registered securities advisor.