Downtown Farmers Market – Des Moines, IA
I grew up on a farm…..but back in the day when no one was ever talking about organic. Now it seems like that is the hot market in agriculture. Our family has been looking at organic farming and we have been discussing the possibilities. This process got me thinking about organic and what that really means. But then my mind shifted 180 degrees and started thinking about organic growth as a business model and I realized that I really had grown up on an organic farm, just not in the way that most people think.
To me organic business growth is just another term for bootstrapping. Another way of looking at bootstrapping is just plain making the best of the assets that you have and growing your business from a portion of the profits that you make every year. In our family we coined a phrase around this concept. We called it Irvinomics (my dad’s name was Irvin). The basic concept of Irvinomics is that you use what you have and you make it work. When I was growing up I hated this concept because what we had in abundance was manual labor. But what I realize now is there are a lot of benefits to growing your business organically. Here are the 8 reasons that I came up with as to why I think this is the best way for most businesses.
- Risk & Stress – Debt adds risk. Risk adds stress. Stress adds pressure. Pressure makes you lose focus on your business. You may start thinking about taking your business in another direction just because you think you can make a quick buck to keep the cash flowing. You may spend too much time just trying to juggle the cash that is coming in and not enough on your customers and what products and services are or aren’t working. And what if you idea fails? You not only have a failed business but debt that you will have to pay back some other way.
- Time to Test Multiple Business Models – Your idea is just the first part of your business plan. How are you going to deliver it to the market? The first model you try may not be the right one. If you don’t have too much invested in that first shot, you can live to fight another day and with another model.
- Creativity – Necessity is the mother of invention. I heard that over and over again when I was growing up. If you have to make something happen and you have limited resources, it forces you to start thinking more creatively about the problem.
- Lean startup – Lean startup is a hot topic. It is built into the concept of bootstrapping. The idea is to get your product or service out to the market as quickly as possible with a minimally viable product. This gives you real feedback from the market who ultimately decides if this is something they will purchase. Throwing a lot of cash into your first iteration may be throwing money down the drain.
- Flexibility – If you move big in one direction from the start, it is very difficult to turn the ship around. If that direction isn’t working, you still may feel committed to it because of the level of resources that you have put behind it. But these are really sunk costs that may or may not apply to your ultimate profitable business model. But physiologically it is very difficult to walk away from sunk costs particularly if they were financed.
- Distractions from your Financiers – Whoever has money at stake will feel free to give you their input……..their money is at stake. This will distract you from running things your way.
- Less Overhead – You may think there is a convincing argument to make to purchase office space rather than lease, or other types of capital expenses. But what happens when that space doesn’t fit your need down the road, or you just don’t succeed. You still have all that expense of owning a building. If you lease, when the lease is done, your expense is done. Bootstrapping makes you prioritize and minimize what you spend while you get your footing.
- Smaller customers – That may not sound like a benefit to you but hear me out. Smaller customers are easier to acquire and satisfy. It is also difficult to become dependent on a single small customer for a large percentage of your business. Large customers can get you off track trying to mold your business to suit them rather than your target market as a whole.
I think most businesses are benefited by organic growth. Yes, there are some capital intensive businesses where this can be more difficult. But even if you are in one of these types of businesses, I would encourage you to think about ways that you can apply bootstrapping. It will encourage you to be more creative if nothing else.
What do you think about organic growth? Have you grown your business this way? Do you wish you did?
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