An interview with business growth expert George F. McAllister
George McAllister is a noted entrepreneurial growth expert in North Carolina. Besides having spent years as a serial entrepreneur, today he helps other companies grow in his role as executive director of the Small Business and Technology Development Center for the Charlotte, N.C. Region.
McAllister’s knack for entrepreneurship began when he was in high school, starting his first business removing honey bees from houses and relocating them into beehives. Once established in the hives, they were kept to produce honey or sold to area beekeepers. In college when the price of silver was reaching record levels, he started a silver recycling business. Then in the 1990’s he started a publishing company that produced page-a-day calendars, one featuring Chapel Hill, N.C. and one for Charlotte, N.C. His calendars ended up being the second and third highest selling page-a-day calendars in the state.
During the dot-com bust, he saw another entrepreneurial opportunity, selling Herman Miller Aeron Chairs on eBay. He set up a purchase and distribution system out of his basement and sold thousands of the chairs.
I first asked McAllister to brainstorm ways a business can grow. His list included:
- getting current customers to buy more
- getting customers to use your product in a different way
- going to new customers
- developing a new product for existing customers
- developing a new product for new customers
- buying a competitor
- expanding locations
- acquisitions
- increasing the sales force
- strategic alliances
- going international
- changing pricing
- celebrity endorsements
Having Michael Jordan endorse Nike, for example, caused sales to skyrocket. Telling people to put Arm & Hammer baking soda in the refrigerator to control food odors was a way to get customers to use a product in a different way.
An example of a local company McAllister helped grow that used several growth strategies is a language translation company. “They started out doing voice translation from one language to another, English to French or Spanish. Then they started translating text, software manuals, manuals for machinery. The company then included websites, brochures, books. As they continued to grow, they opened an office in Lima, Peru and hired local translators paying them the going rate, and that opened even more markets. The most recent addition to their service is brand translating because some brand names don’t translate well into other languages, such as the car Nova which means “no go” in Spanish, so translating brands brought in even more business.”
McAllister says before a company decides to grow, the business owner must consider several issues. “Have they thought about how it will change their life, schedule, family? Will growth be in their comfort level? What’s going to change with their employees, their resources, and does their business model lend itself to growth? I have a CPA friend who is in great demand and he could grow into a larger business, but he doesn’t want to manage anyone else, the same with the owner of a web development company. The owner wants to maintain close contact with each client, a hand-holding atmosphere, so his business model is just one location.” In other words, growth may sound like a good idea, but would the reality be what the owner is prepared for or really wants?
McAllister also says before taking steps to grow, the owner needs to figure out how much profit their efforts will yield. He knew of one business owner who decided to take $50,000 to expand his employee break room. “He wanted to get ready for new employees for distribution, but his 50-thousand dollar investment did nothing for the bottom line. The previous break room was sufficient and the money could have been better spent going toward equipment, computers to take more orders, more loading docks, something that would contribute to the bottom line.
McAllister recommends not spending a lot of money if you’re not going to get your money back in profit within a certain period of time. “Just because you can grow, make sure it’s profitable at all levels of growth. If I have a half-million to invest to grow the company and each year it will bring me an additional $100,000 in sales, in five years I will have made back that a half-million so after that, I’ll still have that additional $100,000 each year. Whatever you invest, you should recoup the investment in three to five years.
And his final piece of advice, “Make sure you don’t grow too fast and outgrow your cash flow. If you have to buy materials, parts, or other inventory to meet customer demands and you’re buying this upfront from suppliers but your customers aren’t paying you for 45 or more days, there’s a gap, or you buy a lot of inventory and it ends up sitting on the shelf for several months. Smart growth is the key.”
