Is the Fastest-Growing Company Really the Best?

Did you know the company that ranked No. 1 on the 2009 Inc. 500 went bankrupt shortly after winning that award? It’s true. On May 1, 2010, Northern Capital Insurance admitted it was insolvent and was ordered to liquidate its assets. After growing nearly 20,000 percent from 2005 to 2008, the company suddenly went out of business.

How did this happen? How could a company that reached the top so fast hit the bottom even faster? You could argue it’s because of bad timing. This company sold property insurance in Florida, which was hit hard by the real-estate bust. But maybe the most important reason is because we have the wrong idea of where the top is for businesses.

Business race winner, Fishbowl BlogSmart Growers

I’d like to point out that I have nothing against fast-growing companies. Most of them are built on solid foundations. Inc. 500 and other business awards are great ways for small businesses to get attention. The problem is the focus is mainly on their results and not the causes of their success. What makes these companies so successful?

There are plenty of awards for fast growers, but what about the smart growers – the companies that build on their success bit by bit until they reach the upper echelons of their industry? Why is most of the focus on revenue growth? The simple answer is a company’s revenue is a clear-cut way to quickly quantify its success.

3 Better Business Awards

Revenue growth is often the outward sign of a company’s many good decisions, so let’s instead focus on the underlying causes. These include a company’s financial health, inventory management and customer service. Companies with staying power all have a strong focus on these three aspects of their business.

1. Financial Health. No matter how successful a company is, it can still fail if it has poor cash flow. That’s because companies don’t pay their bills with profit, they pay with cash. What would an award for a company’s financial health look like? Perhaps there would be accounting accolades for companies with ample cash reserves for hard times, long-term planning, and smart investments in assets.

2. Inventory Management. With inventory management, we could measure how fast a company fills customer orders, improves its inventory turnover ratio, and makes the best use of resources across multiple locations. All of these factors help a company be successful by optimizing inventory management and improving customer service.

3. Customer Service. There already are several customer service awards, such as the Stevie Awards and International Service Excellence Awards. It’s nice to see companies that excel in this area getting some recognition. It would be interesting to see the correlation between customer service and revenue growth. Companies that have a strong customer focus are more likely to enjoy positive word of mouth, which is very important to their future.

Entrepreneurs’ goal should be to build a company that grows and lasts. Business isn’t a sprint, it’s a marathon. Even if you’re the fastest one out of the gate, you may or may not have the stamina to finish first. I’ve listed three ways businesses can go the distance. Do you have other suggestions? Feel free to share them in a comment below!

About Robert Lockard

Robert Lockard is a copywriter with Fishbowl. He writes for several blogs about inventory management, manufacturing, QuickBooks and small business. Fishbowl Inventory is the #1-requested inventory management software for QuickBooks users. Robert enjoys running, reading, writing, spending time with his wife and children, and watching movies. His favorite movies include Mr. Smith Goes to Washington, Fiddler on the Roof, Back to the Future and Lawrence of Arabia.
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3 Responses to Is the Fastest-Growing Company Really the Best?

  1. Pingback: Capped in America | Fishbowl Inventory Blog

  2. Pingback: How to Avoid Growing Your Business Too Fast | Inventory System Software Blog

  3. Pingback: My 10 Best Inventory Management Blog Posts of 2011 | Inventory System Software Blog

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