Growth and expansion are what all small businesses strive to achieve. After all, the primary goal of every start-up business is to (finally) break even. And when you reach that pinnacle of growth, it’s certainly an achievement to celebrate. But if your business’ infrastructure is not prepared for the chaos and challenges that managing rapid growth can produce, you may find your company floundering—and just when you thought it was safe to relax!
It’s an overused metaphor, but businesses can be like gardens. As a gardener/business owner, it is your job to tend, feed, water, and prune in order to encourage growth. The most successful gardeners (and business owners!) understand the importance of cultivating healthy growth over fast growth. But sometimes an unavoidable accelerant is thrown at you (an unexpectedly large client or a viral marketing campaign, for instance) and now your previously perfectly tended plot is looking a little…overgrown.
We do not claim to be gardening experts, but we do know a little something about managing rapid growth and how it can strain your budgets, your employee’s bandwidths, and your operational efficiency. Managing rapid growth can be difficult, but it’s far from impossible with the right tools and strategies. So, let’s discuss the challenges of rapid growth and how to deal with them!
Why Is It Hard to Manage a Fast-Growing Business?
There are so many reasons that rapid or unexpected growth can be a strain on your business—many of which we’ll get into detail about below. But the easiest way to explain and break the concept down can be expressed in one word—change. Whether you suddenly found ten new clients or an unexpected windfall allowed you to purchase all new high-tech equipment, rapid change is guaranteed to disrupt your business’s operations.
Growth often means hiring new people, increasing production, introducing new systems, and possibly outgrowing your office space. All of these changes take effort, time, and money away from your existing infrastructure. Your resources will inevitably be spread thin and you’ll begin to think longingly of “the way it used to be.” Disruption and change are uncomfortable for you, your employees, and your cash flow.
Can rapid growth cause a business to fail? The good news is that, when handled appropriately, change inevitably leads to progress and evolution. So let’s talk about how to appropriately handle the chaos and fallout of rapid growth and redirect it into increased profitability.
How Do You Manage Rapid Growth & Development?
The first step in managing rapid growth is honing your ability to recognize when your company is struggling to adapt. The following are common dangers that are directly associated with the unexpected expansion of your business. We’ve included the strategies and solutions we’ve seen work to reduce and/or redirect these dangers time and time again for our clients.
Increased Demand Can Lead to Decreased Cash Flow
It seems counterintuitive that an increase in customers or sales could lead to a crimp in your cash flow. “Sales = Money” is the tenant of every business. But as demand increases, you have to supply the resources to meet that demand. For a product company, that means ordering more inventory and increased shipping costs. For a services company, it means hiring more employees to supply those services.
Because your prices are likely based on your current operating costs, there will come a stretching point as you grow. Maybe you need four clients to fully cover the cost of a new employee, but even with two, your existing employees are drowning in work. Or maybe you need to order more supplies for your products, but the next lot size up is double what you currently order—in cost and quantity. That’s an investment you have to be willing to take to avoid running out of inventory and upsetting customers.
And no matter what your business, an influx of sales means you’re no longer dealing with only your friends-and-family customers. And that means a rise in unpaid invoices and collections issues.
Luckily, there are options here. First, examine your prices. Make sure you’re on par with market pricing and that you’re not inadvertently offering a “start-up discount”. Consider raising your prices. After all, when you’re in demand, you can charge a little more without losing customers.
If it is not possible or prudent to raise your prices, no worries! You have other options:
- Make sure have you have a realistic budget plan that takes into account the possibility of delayed receivables.
- Create a safety net of cash through business loans, a line of credit with your bank, or through personal means.
- Diversify your client base and/or revenue streams.
- Look for expenses to cut until the crimp works itself out (i.e. bonuses, company lunches, cool bean bag chairs).
Decreased Efficiency = Decreased Customer Satisfaction
It’s efficiency economics 101—operational inefficiency costs your business time, money, and other resources. When your business grows fast, you’ll often find that your perfect business plan goes out the window—along with your operational procedures, your hiring timeline, and your employee satisfaction. And all of this disorder can trickle down into your customer satisfaction and ratings. You should expect some chaos and inefficiency while employees adjust to the new normal, but the following are all signs that the chaos is not being controlled:
- You are receiving complaints from previous happy customers
- Your new employees are poorly trained
- Your current employees are showing signs of decreased morale
- You can’t buy or make inventory fast enough to fill your orders
- Deadlines are consistently being missed
- You’re not really sure how much it costs to deliver your products/services
There is no one fix-all for these problems because they vary so widely. But what’s most important is that the people affected by your business—your employees and your customers—are your first priority. Keeping them happy is what keeps you in business.
Your first step should almost always be to deal with your ordering and fulfillment processes. That ensures that you don’t over-promise and under-deliver. Next, try seeking out the advice of owners who have been in your position and ask them about their most memorable problems—and how they dealt with them! You can also seek help from organizations like the Small Business Administration (SBA) or your local Chamber of Commerce. They’ve seen countless businesses in every stage of development.
And as you’re adjusting—as much as we know you hate to hear it—it’s sometimes better to turn down business you can’t deliver on than to risk providing sub-par service.
The VSTA Method
At iProv, we follow what we call the VSTA method—Vision, Strategy, Tactics, and Alignment. All of our advice above is based on the concept that a solid vision, well-researched strategy, properly implemented tactics, and alignment across your company can proactively prepare you for the disorder that comes with an unexpected development.
This approach to business planning helps business owners quell the chaos without adding to their plates. Delegation is half the battle when you’re already stretched thin, so let iProv help you develop a meaningful, in-depth strategy for your company. We’re here to keep you in business and in your right mind during this exciting, tumultuous time.
If you have questions about managing rapid growth, contact us to schedule a free consultation. We would love to sit down with you and talk about if the VSTA system is right for your company.