How to Break Out of a Growth Rut

Written by Chris Penttila of Entrepreneur.com

Rachel Ashwell started out as a wardrobe and prop stylist for photographers and TV commercials in her native England, where she spent a lot of time exploring flea markets as a child. By the late 1980s, however, she was looking for a change and decided to use her eye for decorating and furnishings to start her own home furnishings company, Shabby Chic.

Launched with $70,000, the company's first location, a 1,300-square-foot store in Santa Monica, Calif., featured washable slipcover furniture and other décor -- items she snagged using her mastery of flea market bargain hunting. The launch was an instant success for Ashwell, who admits that rent, cash flow and inventory were new concepts to her at the time.

"In a funny way, it was my ignorance that made me as brave as I was," says the 48-year-old entrepreneur. "Had I known all the 'what ifs' that could have happened, I probably would have never done it."

Over the next decade, Ashwell added five retail locations, inked a licensing deal with Target(TGT Quote), attracted a celebrity clientele, wrote five how-to books and hosted her own program on the Style Network. But a few years ago, she started to feel like the company was stuck in a holding pattern. "Business was fine," she says. "But it had definitely reached a plateau [at just over $10 million in sales]."

At some point, the rapid growth in your company will level off. Sales will be good, but not great enough to provide the sustained year-over-year growth needed to take your company to the next level. This scenario is fine for lifestyle entrepreneurs who want to keep their companies small, but not for entrepreneurs who aspire to run the next Microsoft(MSFT Quote), Nike(NKE Quote) or Starbucks(SBUX Quote).

"There is a choice [of] whether you want to grow or not," says Larry Greiner, a professor of management and organization at the University of Southern California who has spent decades studying how companies develop. "If you get on the growth path, that's a whole different game."

Ashwell realized Shabby Chic's business model had to change if the company was going to grow. She weighed her options and signed on with private-equity firm Goode Partners last summer to position Shabby Chic for a big retail expansion. The plan is to boost the company's sales by opening at least 45 new stores nationwide over the next few years. "I wanted to build a team that would really be able to support growth," she says. "There are so many things I haven't experienced with my company."

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