Growing Your Business

As small business owners, we often dream of that 7 figure annual sales target.  We can’t wait until our company achieves its first million dollar plus year.  For some, that will happen, but if the information provided by the Small Business’s Administration is correct, anywhere from a third, to half, of businesses will fail within their first 5-years.  In most instances that failure is preventable, primarily due to the experience of the business owner coupled with poor financial management skills. 

A key contributor to a small business’s failure is growing too fast.  Yes, you read that correctly, a business can grow too fast.  If it is a small business and it grows too fast many things happen that cause failure.  The primary areas that can break down during rapid growth are:

  • Service or Production;
  • Service or product delivery;
  • Customer Service and Customer Retention; and
  • Cash flow.

Too many customers, too many customer orders and your ability to produce or provide service is most likely not scaled for that level of production.  If you can’t make or provide it, you cannot deliver it.  As a result, your quality suffers, your customer service and retention suffer and your cash flow suffers.  Your customers leave dissatisfied and your business declines.  Your reputation is damaged and ultimately your business fails because you don’t have enough customers to provide the cash to keep you in business.

But other things happen when you grow too fast as well.  In order to keep up with production you spend.  You hire staff or work them overtime; you buy more equipment and more supplies.  Your spending outflow outpaces your cash inflow.  Before you know it any cash reserves you have are being reduced and suddenly you are cash poor.  You may well, even while growing, have just bankrupted your company.  I’ve seen it happen several times to companies convinced that rapid growth was good and things would work out.  Unfortunately, that did not happen.

Controlling growth is critical to any business.  While some may experience periodic high growth events, and recover successfully, a good growth rate for any business is about 20 – 25% per year.

So how do you control your growth?  The very first step, Slow Down.  You need to be able to adjust to your growth.  Buying more, hiring more is NOT the solution.  Reassess what is happening, adjust your behaviors and LOOK at what is happening.  Develop a scale for what you are doing before you do anything else.  You have to look at all of your processes.  Ask yourself these questions:

  1. What is working?
  2. What appears to be working but may not be working well?

You need to identify your areas of excellence.  Those areas of performance, attitude, and execution.  Hold yourself accountable to all that is or is not happening.

What often happens when you don’t do this is that you become a business of more; more employees, more revenue, more customers, more processes and more to manage.  This new culture of more causes you to lose sight of quality and economy, of efficiency and the new bureaucracy you create.  Sometimes, this becomes the point where you reduce somethings.  Change processes, improve customer service and retention and increase quality instead of quantity.  While you do this, as strange as it may now sound, you continue to move your business forward.  This is when you get rid of the bad.

It may seem hindsight but growth needs to be planned for.  Growing without a plan is a plan for disaster.  Understanding who will help you with your growth, supplierssuppliers, and vendors for example.  Know how you will control costs, what technologies will help you instead of adding staff; how changing procedures will help you instead of staying as you areare.

Another key part is knowing when to pause.  When you need to consolidate what you have accomplished and reorganize it so that you can begin to grow more.  Don’t make the mistake that you will always grow at the rate you are, or that growth will always be.  Many small businesses experience growth plateau’s or even reverses because they reacted to growth by adding, instead of managing growth by pausing and realigning roles and responsibilities.  Sometimes those plateaus just happen, then what do you do?

Leading and managing a suddenly growing business isn’t easy and it is rarely as simply as obtaining more space or employees to perform well.  If you plan well, manage the growth, pay attention to all areas of your business and remember that your cash on hand must be replenished at an equal or greater level to successfully continue, then you will be successful.  If you don’t, you may well become one of the thousands of U.S. businesses that fail as fast as they arrived in the marketplace.