Dangers of Rapid Business Growth and What to Do About Them

Written by promotiondept

September 27, 2018

Last Updated: Sep 27, 2018Once your business becomes profitable, your next goal is probably to see it grow. If that growth comes too fast, though, you could run into some unexpected problems. Here are the top six problems caused by rapid business growth and advice for how to handle them. The growth and expansion phase […]

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Last d: Sep 27, 2018
Once your business becomes profitable, your next goal is probably to see it grow. If that growth comes too fast, though, you could run into some unexpect problems. Here are the top six problems caus by rapid business growth and advice for how to handle them.

The growth and expansion phase is an exciting time for any small business. The primary goal of a startup is to get customers, deliver the product or service and reach the break-even point as quickly as possible. According to the conventional business plans, once the break-even point is achiev, profitability should follow. For some small businesses, however, another goal is rapid growth. And, that can be a problem. Businesses often underestimate the intense pressure that accompanies rapid business growth.

The costs of running a flgling business can be difficult to manage, especially coming on the heels of cash outlay to open the business. At this point, your business may be surviving on crit as you try to grow sales and revenues. As you push for higher sales, expect monthly expenses to grow and possibly exce your monthly revenues. If your collections are on track, that’s not an insurmountable problem. However, a cycle or two of delay collections could leave your business in that proverbial s between a rock and hard place.

To keep cash flowing anticipate the cash crunch with a realistic plan that accounts for delays in the collection of receivables. Prepare a back-up plan for raising cash from sources or through a pre-approv line of crit from your bank. Diversify your client base if possible. If you depend on one big client as a revenue source, you are leaving your small business vulnerable to the whims of the client.

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When your business starts growing quickly, you will be forc to improvise to manage increas demand for your products or services. When business up happens too fast and too soon, you will not be able to adhere to your perfect business plan where your operational processes flow smoothly. You may be pressur to hire more sooner than you anticipat, and you may not be skill in choosing the right or you may not have the time to resign your workflow to accommodate increas demand. While higher demand should lead to economies of scale, this may not happen if rapid growth results in any of these problems:

Manage the ordering system and the order fulfillment process so that you will not end up over-promising to your customers. If possible, talk to owners of other fast growing businesses to see what problems they experienc and so you know what to plan for. Ask advisors at a local Small Business Development Center (SBDC) or SCORE chapter for advice. Their services are free, and they may be able to help you be aware of problems and solutions for your type of business.  Remember, too, it is better to turn down customers than risk annoying them if you can’t deliver on time or can’t deliver quality and services.

A few customer complaints occasionally are part of doing business, but when negative feback starts to pile up, it is an indication that you are not meeting client expectations. This could be due to lack of personnel to manage client interactions. It could also hint at other issues if your staff is spread too thin and is cutting corners to meet customer demand.

Clients who positive feback are bound to be repeat customers. A host of negative feback could indicate that you are unable to cope with the market’s expectations in terms of the delivery because you are overwhelm. Make sure to monitor your feback system regularly, keep an eye on social mia mentions of your business, and have a plan in place for handling both positive and negative feback.

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A vibrant workplace inspires employees to work their hardest, but when work consumes most of their waking hours, you run the risk of losing your train and trust employees. You may that your business is a revolving door of employees in spite of generous compensation and benefits.

Pay attention to the evolving workplace culture as your business grows. the time to discuss quality of life issues during staff meetings. Make sure to address personnel matters as ne, but do it expitiously.

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As your business grows the number of employees, desks, filing cabinets, and amount of inventory you keep on hand are likely to increase, too. If you outgrow your office space and to move to a new location before your lease is up, you could be responsible for continuing to pay the lease until a new tenant is found for the space.

The best way to avoid this problem is to plan for it when you are signing a lease for commercial space. If just starting out, you may want to opt for an executive suite or space in a business center that you rent by the month, or year.   If your business is at the point where it make sense to sign a more permanent lease, then then you’ll probably want to limit the term (number of years) for your lease  to 3 years if you expect to be growing more. And, if possible have your attorney negotiate an “out” clause in the lease. This is a clause that would spell out terms under which you could end the lease early, such as by giving the landlord 3 months written notice.

If you are al in a lease that doesn’t have an out clause and you ne more space, ask your landlord if they available space and can work with you. If they don’t or you don’t want to stay in the same location, see if your lease will let you sublet your space to someone else, and under what terms.  

As the business grows, the founders eventually transition to a leadership role, delegating most of the operational decisions and functions to someone else. However, growing too quickly could make you lose your focus on essential functions and take on too many tasks, delivering below-par outcomes that lead to frustration within your company and disappointment for your clients. The problem escalates when internal business systems and procures are mishandl due to everyone being overwork. Inadequate control over budgeting, inventory management, marketing and sales programs could derail your success as a business.

Outsourcing some functions is a viable method to delegate some non-critical administrative functions. This arrangement can be transitional or permanent, depending on your nes, but it is important to scale your processes to align with your growing business. No one is an expert in everything, so this may be the phase where you bring in the best personnel you can to help guide your company through the changes requir to become a bigger and better business.

According to data from the Bureau of Labor Statistics, about half of startups survive the first five years while a third survive for at least 10 years. The survival trend has not chang much through the years, and businesses that are prepar to handle rapid business development and expansion are most likely to thrive.

© 2018 Attard Communications, Inc. All Rights Reserv. May not be reproduc, reprint or ristribut without written permission from Attard Communications, Inc.

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