In the business world, success is often measured by revenue growth and record-breaking financial years. Yet, these celebrations of prosperity can sometimes mask an underlying reality – one where a business' growth can paradoxically pull us further away from your goals and priorities. I call this the High Month Paradigm, an all-too-common phenomenon, and one I came face-to-face with a few months before writing Rigging the Game.
When a client of mine celebrated their highest revenue year ever, marking an impressive $60 million, they naturally presumed that they were in an advantageous position. They anticipated leveraging their increased revenues for further growth and expansion. But a deeper analysis revealed a shocking reality.
Despite the client’s record year and increased revenue, they were in the worst cash position to date. They were stunned; I was not. This scenario was illustrative of the High Month Paradigm.
In the High Month Paradigm, businesses experiencing planned growth and increasing revenues often reach their financial peak, sparking elation among owners and stakeholders. But often the best month comes with an increased risk of adverse outcomes such as overspending. These negative impacts and excessive spending can manifest as sleepless nights for business owners, constant metaphorical fire drills, and various other issues that steadily divert you from your originally set goals.
This phenomenon occurs because many businesses, while on their growth trajectory, fail to recognize and address the effects of this paradigm. As the revenue increases, the business often makes assumptions about the trend line, acquires more fixed expenses, and consequently, experiences a decrease in cash flow.
The High Month Paradigm exemplifies a version of Parkinson's law in business. According to this law, work expands to fill the time available for its completion. In a business context, as revenue goes up, problems can proportionally expand, often in areas unnoticed when fixated on financial success alone.
Therefore, understanding the High Month Paradigm is crucial for businesses on the path of growth. Recognizing that periods of prosperity can lead to increased risks and potential divergence from priorities can prepare businesses to better manage their growth. It encourages us to focus not just on increasing revenues, but also on identifying and mitigating potential risks, ensuring that business growth brings us closer to our goals, rather than pushing us further away.
Pause and Reflect
- Have you ever experienced the High Month Paradigm in your business?
- In your opinion, what are some common risks businesses might overlook during periods of rapid growth?
- Have you put in place strategies to identify and mitigate risks as your business grows? What are some successful strategies you can share?
- Can business growth sometimes act as a distraction from identifying and solving underlying issues? How can one maintain focus on both growth and risk management?
- How do you ensure your business decisions bring you closer to your personal priorities, even in periods of rapid growth and prosperity?