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Moment of Truth: Easy Street or Go-Go Growth at 100% a Year?

“Moment of Truth: Easy Street or Go-Go Growth at 100% a Year?”

‘What do I want to do with this company?’

The ’90s have been good to Margaret Carrera. Formerly a rising star at a large accounting firm, she broke away to start her own information-systems consulting company in 1991 with one employee — herself. Eight years later, she sold her business to Maximus Inc. in a transaction valued at approximately $30 million. Today, Carrera runs her company as a wholly owned subsidiary of Maximus.

Yet it wasn’t always a smooth ride. In late 1995, Carrera faced a dilemma. She had built a small but comfortable business with 12 employees and a relatively secure niche as a minority, woman-owned firm that won bids for many lucrative municipal contracts, primarily performing information-technology strategic planning.

Carrera knew that she could coast. Preserving the status quo would produce a steady, ongoing income stream for her and her business. The risks of staying the course were minimal — the rewards, considerable. But, "There comes a point in any entrepreneur’s career when you ask yourself, ‘What do I want to do with this company?’" she says. "You have to decide between a growth strategy or a maintenance strategy. I decided to go with growth."

Carrera knew that she could capitalize on opportunities in the marketplace, such as her clients’ emerging need for Enterprise Resource Planning (ERP) systems. By entering the ERP market, she took advantage of the growing trend to replace antiquated systems with more efficient client-server, technology-based systems.

She also knew that to retain her employees, she had to listen to them. And they urged her to grow. Her top employees wanted to advance their careers. Carrera feared that unless she grew, her best people would leave if she failed to lure them with increasingly exciting and challenging work.

What’s more, in July 1995 Carrera established a partnership with PeopleSoft, a developer of financial management and human-resources software. Her firm began specializing in implementing PeopleSoft’s products for the public sector. But to make this partnership pay off, Carrera wanted to expand her client list significantly rather than just tread water.

But just as Carrera identified three reasons to grow, she also isolated three reasons to adopt a maintenance strategy.

First, she knew that fast growth might not lead to growing profit margins, but it would definitely require a surge of investment that Carrera had managed to avoid thus far.

Second, she would face a larger payroll and incur increased fixed costs.

Finally, Carrera liked how she spent her days. "As you grow, you become more of an administrator and less of a hands-on entrepreneur," she says.

The Execution Stage

Carrera secured her first line of credit for $500,000. She soon followed up with a $1 million line of credit.

After deciding to expand, Carrera huddled with her senior employees and agreed on a growth plan. They set a remarkably bold goal: to grow at 100% a year for each of the next three years.

To get there, Carrera defined a series of steps, including ways to attain not only the financial goals, but objectives involving service delivery and staffing.

The original six employees who led the way implementing Carrera’s growth strategy remain with the firm today in increased roles of responsibility. The low turnover of her key players has helped validate her decision to grow.

As president of Carrera Maximus Inc., a Sacramento-based unit of the parent company, she now has 150 employees.

Writer: Morey Stettner