Living with a Cash CowScott Williams
One of the stages in a business lifecycle is known as the Cash Cow stage. Essentially, it is a stage when the business is optimised for profit rather than growth. This life stage ultimately comes to most businesses and/or their Business Leaders. Read more about managing a Cash Cow in this article. Yellow Belt
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First, let’s explore the four life cycle stages of a business or product. Read about the Boston Growth Matrix to get a grounding.
Now, read more on the Cash Cow stage.
At some point, you may decide that “enough is enough” and move from growing your business (and likely forgoing profit) to harvesting Profit with a “Cash Cow Strategy”. This is a very normal process in the life cycle of businesses.
If you decide to do this, it is probably going to need considerable re-think on the way the business operates .
Staffing a Cash Cow
The staff who were the right people for a growing business will rapidly get bored in a business that is slowing down. Even worse, they may keep working but they will simply be “embroidering” and making unproductive and expensive changes to things to “keep busy” (see Parkinson’s Law) . Therefore, you may need to change or re-assign the personnel.
You will also need to consider your personal orientation as a business leader.
It may be that you have reached the point in your life when you can become a “Cash Cow” operator. This is often the case when you want to slow down a bit and adopt a better lifestyle. This is a common situation and no indication of any failure on your part.
Alternatively, you may be a natural growth leader. If you are a growth leader in a “Cash Cow” company, you will be just as guilty as your staff of “embroidering”.
In this instance, you might give thought to hiring a Manager specifically to run the “Cash Cow” element and keeping your hands off it. Perhaps develop a new Category where you can rinse and repeat your success as a successful entrepreneur.
Optimising a Cash Cow
Your business is in the process of moving from increasing Profit by increasing Revenue to increasing Profit by taking Costs out of the operations.
Over the course of growing the business, you will have developed “barnacles” in the business that are slowing you down; just like a boat.
When the business is fast growing, it makes sense to focus on growth rather than removing the drag-causing barnacles.
But when the business is in a steady state, barnacles simply drain away a lot of energy consumed by pushing the business along in spite of the barnacles. When this happens with boats, they scrape the barnacles off the boat in order to get it back operating efficiently. You may need to do that with your (now) “Cash Cow” business.
We offer an Optimise100 Campaign specifically for this purpose. It demonstrates how to optimise your business in 100 days. (see here)