November 19, 2009

Grow or close down…

One of my childhood memories is about the butchery in Beyoglu, Istanbul, where I went with my mother while shopping. The butcher had a son in my age. The shop of that butcher did not change at all during the years we have visited it. The butcher got old; his son and I grew up. Later, the son took over the butchery. The butchery continued to do business for years, until it closed down, after loosing its clients to the supermarkets in the malls.

Even 15-20 years ago it was possible for you to be content about the size of your business and to aim to preserve that size. Today this is impossible other than in some rare exceptions. Now all companies, small and big, need to grow  to sustain their business as a result of globalization and the technological developments. The average life span of a company in 1930’s in the developed countries was thought to be around 60 years  while this expectation is now defined with figures in the tens.

The alternative to growth is getting smaller. In reality, this is not an alternative. This means slowly disappearing from sight. Thus, two options usually have come out from our discussions with the shareholders  of companies we were talking to: Either you will grow  your business or you will think about closing down your company to prevent the painful scenario of slowly losing your presence in the market.

The organic growth is limited. One of the ways for small companies (SME’s*) to realize growth is achieved by selling some or all of their company shares while the big companies try to secure growth by purchasing shares of other companies.

The same theme is valid for the economies of countries. Since the start of the financial crisis, the issues we have been discussing are mainly about growth.

 

*) As SME’s I am defining companies with turnover less than 80 million € or companies with less than 250 employees.

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