What’s the best thing about a company to grow bigger? Not all companies are suitable for big development. Small and refined are the mainstream of future development. Unfortunately, many bosses only realize this after bankruptcy, and in the end it is too late to regret it. -Follow me and take you to unlock more new knowledge
I have been in the laser cutting equipment industry for many years, and have dealt with many manufacturing bosses. I found that most of the closures of enterprises are caused by blind expansion. Take a customer (Mr. Sun) I worked with some time ago as an example. The company mainly makes packaging equipment. Those who know this industry should know that the internal market environment of the industry is still fierce. Since Mr. Sun joined the industry earlier, he has some large customers with relatively stable orders. Considering the current business situation, Mr. Sun wanted to break through the current situation and earn more money by taking more orders; for this, he spent a lot of energy and finally won a big customer. The other party had a large order volume every year, but the construction period was relatively tight, and the accounting period was more than 180 days.
comprehensive considerations, General Secretary Sun decided to cooperate with the other party, and to continue to rent new factories, buy equipment, and recruit workers. During this period, the cooperation between the two parties was relatively stable. Mr. Sun felt that his company could take on more orders even larger scale, so he continued to expand and even proposed a plan to go public within three years. But he ignored the most important point, that is, the specific production and operation of the customers he cooperated with. In fact, the order volume of this company was not very stable. At that time, he asked Mr. Sun to cooperate with him to have large orders in the short term. Because of Mr. Sun's misjudgment, a large amount of equipment in their factory was idle, and the high factory rent, labor costs and raw material costs became the last straw that broke the back of Mr. Sun's company.
I think there are two reasons for Mr. Sun’s failure in his business process. First of all, he was too blind to his company's processing strength in the industry. In fact, the surge in their company's orders had nothing to do with technology, but only with the market demand at that time. Secondly, Mr. Sun consumes too much cash flow ; for a company that started earlier and has a customer base, cash flow is his biggest advantage compared to his peers. Now, blind expansion consumes a lot of cash flow, which has accelerated the bankruptcy of their company.
In my opinion, it is not necessary to seek large size in the process of enterprise development. As long as it can ensure a reasonable profit margin, the scale of the enterprise is smaller. Compared with disorderly market expansion, a stable and progressive production and processing method is more suitable for the current market conditions.
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