It’s the moment you’ve been waiting for. Months or years of hard work, coming up with idea after idea, pitching to investors and carefully shepherding the best one along into a viable product around which you can build a business. You’ve been at it for a little while and the early returns are good-;sales are up, customers are enthusiastic, and the market seems to be there for even more. This sounds like the perfect time to grow-;and to do it quickly. But before you jump in feet-first, you need to stop and assess. Growing too quickly can be just as dangerous to your business as not growing at all.

What are the dangers of rapid growth and how do you avoid them? Here are some of the pitfalls you need to avoid.

1. Losing Track of Finances 

As much as anything else, excessive growth has to do with your business outpacing your capacity to conceive of its size and scale. Brian Hamilton, chairman of financial information company Sageworks says, “When your business is smaller, you probably have a pretty good command of your numbers. You’re able to watch your cash and know quickly how expenses are stacking up to sales. But once you get to a certain sales range, above $5 million or so, it’s very hard to keep track of your financials in your head.”

Keeping track of your budget and understanding your cash flow is key to making sure you don’t make a mistake you can’t come back from. Brian suggests making sure you consult your accountant more often than just during tax season. They’ll be able to look at all the data available and tell you what the actual situation is, and they’ll also have data about other companies like yours to help you understand the context of your decisions.

2. Cash Flow Mistakes

Cash flow mistakes are incredibly common, and a big reason why many small businesses fail. Whether it’s overly-optimistic growth projections or the failure to understand the difference between profit (which is the amount of money you keep after your expenses are deducted from your income) and actual cash on hand, a slip-up here can mean big trouble for your business.

As your business grows, it can be easy to get to a place where your monthly expenses exceed your operating capital. That’s fine as long as money keeps coming in the door, but if you aren’t careful, you could be one bad month away from being sunk if you don’t plan accordingly.

3. Overvaluing Sales

Some entrepreneurs think that if they take care of sales, then everything else will follow. But those numbers aren’t the end-all, be-all. This is an especially key insight when you make financial decisions: revenue is a useful metric, but you need to use all the information you have at your disposal. It’s important to build your business, but make sure that the decision to grow is based on a solid financial evaluation, including market studies, economic analyses, and all the other data that’s out there. As Hamilton puts it, “It’s much harder to grow well than it is to just grow.”

4. Ineffective Business Operations

Getting bigger means that you need to get more organized. Working fast and loose may have been fine for your small team of superstars, but it won’t work as well with a bigger group. As your ranks grow and positions that were filled by individuals transform into teams of people, the need to stay organized becomes amplified.

A lot of this comes down to access to information: cost estimates, budgets, cash flow, sales, inventory, etc. Making sure that everyone in your company works together as a team around the core principles that have made you successful so far is key, and that means getting organized. 

5. Hiring the Wrong People

The balance you are able to create within your small team of great people is part of the magic behind how an excellent startup happens. However, as you grow, it becomes difficult to keep hiring people who check every box while also filling your needs as quickly as possible. If you’re in growth mode, you’re rushing to generate revenue you can use to pay back the loans you’ve received to help build the company. You need people with specific skills, and you need them now. However, at the same time, you need to make sure that you know where you’re willing to compromise, and where you aren’t.

6. Not Scaling Customer Service

Just as your sales team needs to grow as your company does, you also need to keep up with the increased demand for customer service as your business grows. Many smaller businesses build their reputation on excellent, personalized customer service, with representatives who are more than willing to go the extra mile to convert a customer into an advocate.

Rapid growth can make it difficult to live up to your stellar reputation. Worse, slipping customer service doesn't typically generate metrics like sales numbers to let you know how you’re doing. Make sure that, as you grow, you pay attention to your customer service operations, and have clear standards that put you in a position to succeed.

7. Management Mistakes

As your business grows, you need to be able to step back and look at bigger picture. Too many founders get wrapped up in the tiny day-to-day details (which balloon as your company gets bigger) and don’t focus in on the essential business functions. Don’t become a micromanager. At the same time, be careful not to become divorced from the daily reality of your business, because this disconnect is also dangerous.

8. Scaling Technology to Business Need

Technology and connectivity both play key roles in the growth of businesses. Your business needs to have the right tools in place to ensure all systems are running efficiently and effectively. Businesses these days need solutions that range anywhere from internet and storage solutions to voice over IP and cloud-based applications. The technological requirements of a business vary greatly based on size, goals, and structure of a company. You’ll need to have a clear vision of what your business needs before scaling it forward, both in terms of functionality and cost. There are risks in both too little, and too much.

If you’re unsure where to start, consider hiring an internal IT employee who can help put the right technological processes in place. If you aren’t quite ready to hire internally for that position, a managed service provider can be a very useful partner to lead you in the right direction.

What You Can Do Right Now

Business growth is exciting, but it's important to manage it well. Growth can be dangerous for your company if you don’t go about it the right way. Don’t lose track of your finances, and make sure that functions such as customer service, technology, and business operations are built to scale. Here’s what you can do right now to help:

  • Get help keeping track of your finances, and track more than just sales numbers to make decisions.
  • Build your business to scale so business operations, technology, customer service, and human resources grow at the same pace to meet the growing demands of the business.
  • Don’t get bogged down in micromanaging when you need to keep your focus on the big picture.

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Published on: Oct 10, 2017