Anticipating Growth Rates

of 20% or More

Case #89

The Challenge

A historical growth rate of 20% annually means a company will double its sales in less than 4 years, on a cumulative basis. Planning for future increases is exceptionally difficult.

The Situation

Our client had been growing at a 20% per annum clip for the last 4 years. New equipment had been added and staff had grown. The physical space could not handle any additional equipment, no matter how efficient the layout was. The plant was bursting at the seams. Similar growth rates were anticipated, by the owner, for the future.

The Analysis

On the surface, this situation only requires new production facilities. The site had already been selected and the general building dimensions identified. However, there were larger issues that also needed to be explored.

A major question to be explored was the possibility that the business would continue to grow at a rate of 20% per year and therefore double its size again in 4 years. Making an investment today for doubling one’s size four years down the road is a tremendous risk and the business owner was relatively conservative. In addition, there were only limited funds for such an investment.

A second issue that needed to be anticipated was the impact on the employees when moving from small quarters to a larger plant. On the surface, it seemed that the employees’ working conditions would improve with more space and better air flow. However, any change can be upsetting and needed to be addressed to avoid a loss of good staff.

The Recommendation(s) / Decision(s)

The decision to move the operating plant and deactivate a growing sales location was made. The sales growth at that location was not impacted by this move at all.

Designing the plant ingeniously included a plan that allowed for continuous addition of equipment as needed while maintaining a smooth workflow in the plant until sales doubled again. This resulted in far less initial investment and limited the owner’s risk if, in case, the growth rate did not continue as anticipated.

Employees participated in every aspect of the new plant design. They visited the site as it was constructed and became comfortable with their new surroundings.

The Outcome

The company has continued its growth rate. New equipment has been added during 4 major expansions and the original work flow has been able to accommodate this growth.

No employees left after moving to the new site.

Adding new product lines create different types of growing pains and are addressed in Case #82.

Please contact MFM if you would like additional information.