Fast-growing businesses can face financial, legal, staffing, and supplier issues. Don’t get blindsided, check out these rapid growth problems and tips on how to avoid them.
1. Staffing Problems
Rapid growth can stress your employees. Try to keep workloads reasonable and check out this post for stress-reducing strategies: Stressed Employees? 4 Tips to Lighten the Burden. You may have to hire quickly to keep up with demand when business is booming. It’s important to find the right candidates, vet properly and train them thoroughly before they come on board. Poorly prepared employees can impact productivity behind the scenes or turn off customers up front.
2. Unhappy Customers
Treating customers with care and respect can lead to repeat business and word-of-mouth recommendations. When you don’t have the time and staff to dedicate to customer service, your business can suffer. Make sure you don’t let customer service slip when sales increase. For tips, review this post from the SmartBiz Blog: Keys to Great Customer Service – Even if You’re a One Man Organization.
3. Uneven Cash Flow
A 2018 U.S. Bank study found that 82% of the time, poor cash flow management or poor understanding of cash flow leads to small business failure. During a growth period, you often have to spend money to make money, but it can be hard to keep a handle on the money coming in and going out.
This can lead to problems paying vendors, buying inventory and even making payroll. The key here is to stick to your financial policies so accounting runs like clockwork.
Learn all about cash flow calculation and management in the SmartBiz University post: Analyzing Cash Flow.
4. Outgrowing Your Place of Business
One of the most common difficulties that businesses face when growing is running out of space, especially if you’re running a home-based business. This could mean you need additional room for new employees, inventory, meetings and presentations, or equipment and tools. You have some options if things are getting crowded.
Your business can move to a larger space, expand the current space or open an additional office. Run the numbers to make sure a move won’t negatively impact your cash flow.
Another option is to get a low-cost commercial real estate loan and purchase a space big enough for current and future growth. You’ll build equity and add value to your business. For information on commercial real estate SBA loans, check out the SmartBiz Loans website: Commercial Real Estate.
5. Cash Shortages
It costs money to ramp up production. Added revenue from increased sales often takes time to catch up with the expenses you rack up. If you’re not collecting accounts receivable quickly enough, you can run into big problems.
The Quickbooks blog suggests: “Make sure you're doing your part to collect on accounts receivable. Include payment procedures in your contract, purchase order, supplier and invoice. Make the information available to your customers in as many ways as reasonably possible.”
To create an effective invoice, follow the steps in this blog post: Create a Professional Invoice.
6. Losing Track of Finances
If you’re experiencing rapid growth, you’re probably being pulled in many different directions. It might be time to bring on an accountant to help you keep track of your budget and understand your cash flow. You don’t want to make a mistake that could sink your expanding business. Your accountant will be able to crunch the numbers and look at available data to keep finances in line.
Hire someone with small business experience and they’ll have the background to guide you through expansion. Here’s a post that can help you as you search for the best fit for your business: How to Hire an Accountant for Your Small Business.
7. Overvaluing Sales
Taking care of just your sales doesn’t necessarily equal sustainable growth. Revenue is a good metric but shouldn't be the only numbers you review when making business decisions. There are many other factors to consider when you have a growing business. Look at market studies, factor in the current economy, see what your competitors are up to and keep track of your cash flow.
8. Management Mistakes
As a business owner, you're ultimately responsible for sales, staffing, payroll, product development, marketing, managing debt and more. Your mistakes can permeate the entire company and affect the bottom line. Be aware of the following management mistakes:
- Being negative
- Ignoring marketing
- Micromanaging employees
- Not delegating
One of the biggest mistakes a business owner can make is failure to have a strategic plan for growth in place. SmartBiz Loans CEO Evan Singer addressed this issue for Forbes. Check out his insights and strategies to put a plan in place: How To Create A Long-Term Plan For Your Small Business.
9. Losing Touch with the Customer
It’s important to give customers attention after you make the sale to help forge a strong and long-lasting relationship. When you’re just getting started, it’s easy to give customers the care they need. However, as you grow, it may become more difficult. Keep in touch with your customers by being responsive on social media, sending thank you notes, recognizing birthdays, offering deals and discounts and quickly addressing problems.
10. Operational Inefficiency
The busier you get, the more organized you need to be. Do you have systems and processes in place to help you scale? Have a clear process that each team member understands.
When a task needs to be completed, make sure there are specific steps to be taken. You’ll improve efficiency and avoid having things slip through the cracks. There are many tools available to help a small business get organized. Check out the following posts to help you get started:
Every business faces some issues when trying to expand. The key is to be proactive about problems you know might come up and flexible enough to handle issue you may not have anticipated.
Visit the SmartBiz Small Business blog to read stories about real small business owners and how they handle rapid growth: Business Success Stories.