It's probably the best problem for a small business to have -- an unexpected boost in sales. But if handled badly, too much business can send a small business packing its bags.
Experts say the biggest mistake a small business that gets an unexpected boost in sales is not having the working capital to fund the work. There are employees to pay, supplies to buy and other upfront costs that go into producing widgets or providing some kind of service.
But small businesses and experts say several strategies can be used to handle an unexpected sales surge. Some make arrangements with suppliers and vendors to handle the surge, others have outsourced some of their work and some even hire temporary workers.
One of the first things a small business owner has to do, even before a sales surge occurs, is have a plan in place if a load of work comes their way. Know what resources the business needs to tap if an unexpected sales boost occurs. It's also vital that a small business have strong ties to a bank that can provide a short-term loan to be able to fund the work.
"There's the cost of hiring people or extending your line or buying new equipment and all of a sudden you have capital outlay expenses that you're not prepared for," says Karyn Greenstreet, a small business coach in Revere, Penn.
A business must also decide if they should accept the large job if it's something they haven't already committed to. It's easy to fall into the trap of wanting to take every business opportunity as a small, fledgling company but the sale has to fit into the strategic direction of the firm, Greenstreet says. Some questions to ask are: What's it going to cost to bring in this sale? What is the lifetime value of this work? Will it lead to repeat work from this customer or is it a one-time deal?
If the small business has already accepted the work, the big puzzle to solve is resources. The small-business owner needs to identify where he's going to get help to complete the job at the same level the company has always delivered the work. A service firm may have to outsource some components of the work or they may have to hire temporary workers for short-term jobs and train them. Another type of business may be able to hire subcontractors through different online sites, Greenstreet says.
HireStrategy, a professional staffing firm based in Reston, Va., saw an unexpected boost in sales in 2003, particularly from Freddie Mae, a home mortgage company that was experiencing a surge in business a few years ago. HireStrategy also experienced an unplanned boost in 2006 when Fannie Mae, a secondary mortgage company, was going through an accounting crisis and needed additional workers. So how did the small firm handle the demand for work?
Paul Villella, president and founder of HireStrategy, had the option to form a teaming agreement with another firm but instead directed his own executives and senior managers to hire more workers to handle the surge and train those new employees to fulfill the needs of the clients. Some were workers with less experience than what the company usually hired but with proper training they were able to meet some the demands.
"We were producing just fine but our ability to answer that demand improved when resources were more trained," Villella says.
The company ended up hiring about 30 employees and consultants in 2003 and 60 in 2006 to complete the work. And the company continues to grow. Revenue is expected to hit $20 million by the end of this year, up from $16 million last year.
Seth Goldman, founder and president of Honest Tea, a beverage company based in Bethesda, Md., sees some surges in sales as a way to create demand for the product, especially if there's a slight delay in being able to deliver the product. If the company has a production run scheduled and has communicated the delay to the customer, he doesn't see a problem with the occasional surge.
"It's not the worst thing to run out of product all the time," he says. "It keeps your cash tight and you even create a little bit of a hunger or buzz in the market when it keeps selling out. The goal isn't to be too far ahead or too far behind."