Given the choice, most entrepreneurs would prefer their businesses to grow -- not get stuck on a plateau or, heaven forbid, shrink. But there are times when growth isn't good, and as an entrepreneur, you need to know when to grow -- and when to lay low.

Kevin Daum (remember him from this post?) had a very successful custom-home mortgage company -- Stratford Financial -- that was humming along very nicely in 2000. In fact, the company was doing so well that, with company annual revenues growing quickly to more than $1 million, the under-40-year-old Kevin qualified for membership in the Young Entrepreneur's Organization (now called simply, Entrepreneur's Organization). So Kevin naturally wanted to do what every entrepreneur wants to do: grow his business at an even faster rate. To accomplish this goal, Kevin started a new company: Build Your Dream Home (BYDH). Within four months, Kevin raised $2 million in angel funding and he pursued venture capital to try to boost overall funding to $5 million. Unfortunately, at about the same time, the venture capital market shifted, and the possibility of raising the additional $3 million he needed to make BYDH fly evaporated.

So, BYDH began to falter, and Kevin decided to merge it into his existing organization, Stratford Financial. However, BYDH's continued decline soon became a huge drag on the entire organization, and Kevin decided that he would need to close BYDH and return what was left of the investors' money (not much) rather than declare bankruptcy. But before Kevin could cut away the fast-dying BYDH organization, it pulled Stratford Financial underwater as debt shot up and cash flow plunged. Says Kevin, "So I called all our creditors and said, 'We have a choice. We can blow this thing up today, or we can put a new plan in place that gives this company a chance. I'm not paying you for 90 days. And that's your best shot for getting your money back." Kevin's creditors agreed, and he put a new plan into place. Stratford Financial began to climb back out of its hole, and it returned to good financial health -- just in the nick of time.

Kevin learned a very hard lesson about growth: not all growth is good growth. Of course, this is a hard thing for most entrepreneurs -- who naturally love to create new ventures, and grow existing ones -- to accept. But sometimes growth creates problems that even the most optimistic and energetic entrepreneur can't solve. As you review your own opportunities for growth, consider them very carefully. Do you have the resources -- both people and financial -- to take the plan to completion, or will you run short before you reach the finish line? Are you going to grow organically, or will you have to depend on outside investors for the capital you need to finance your growth? If you will have to get your capital from outside sources, how solid are they? Is there a chance they'll pull out when you need them the most?

And remember. Growth can be GREAT, but it's not always good.