Businesses can efficient whatever the size, Gtech's Nick Grey tells Management Today.
After finally generating profit, there’s usually one thing at the top of a founder’s mind: growth, writes Management Today reporter Oriana Rosa Royle.
But while pumping money into growing a business can generate increased output and consumer demand, if you're not careful, it can also lead to poor financial discipline and overspending.
Looking back on Gtech’s growth and expansion phase, its founder and CEO Nick Grey says “the company was out of control” when turnover shot up from £4m in 2011 to £120m by 2017. Because at the same time, the home and garden cordless company’s spending went through the roof to £1.7m per month.
Today, Gtech runs consistently below £400,000 per month. Here’s how Grey broke the high-spend, high-growth cycle.
“It's very difficult for an owner and the business itself to keep control of everything when you’re concentrating on growth. And we grew very, very fast.
People got into the habit of getting more money to spend each year - and they were spending it. I read them the riot act and said: “I don't know how we've spent that much money, but that isn't funny. We don't need to run the business at that level.” Fast forward to today, Gtech ran on £394,00 last month.
To paraphrase Einstein, leaders should focus on the value over the cost of things. We aim to make everything the most valuable it can be. This is true for each operation at Gtech. The key outputs for our business are the design of our products, the quality of our products, our customer service and efficient marketing. If the cost isn't adding value to those four key pillars, then we shouldn't be spending it.
£1.7m was a silly number from a company that had grown very fast and wasn't being prudent. We still have the same standard of everything. In fact, our products are more reliable now statistically than they've ever been, and they last longer. We answer the phone quicker than we ever did. It's just we spend less money on things that are not valuable.
We were overspending because things were going phenomenally well and we were focusing on harnessing that growth. But all great growth spurts come to an end. Businesses need to focus on being efficient, whatever their size.”