How a Rapid Growing Business Can
Put Your Business at Risk
Years of hard work, multiple ideas and brainstorming sessions, pitching to investors, sleepless nights, long working hours and now it’s the moment you’re waiting for; sales are high, growth rate is so fast, payback period is shorter, returns are faster, have strong loyal customers base, increasing market share and growing the business in less time, everything seems going great.
It sounds a perfect time to grow, excited for expansion and enthusiastic to move forward quickly. But stop, before any other decision analyzes and assess in -depth about your business model and growth strategy.
Growing rapidly can be just as dangerous to your business as not growing at all as businesses often underestimate the intense pressure and competitiveness that accompanies rapid business growth.
What should we consider before growing rapidly? What are the dangers of rapid growth? Here are a few dangers/Issues you might seem due to rapid growth and advice for each how to handle/avoid them:
1. CASH FLOW CRUNCH TO MEET THE INCREASING DEMAND:
Expansion of new business; opening a new branch, hiring more staff, buying machinery/open up more channels of sales requires sufficient funds and for a newly growing business it’s quite difficult to manage as at this point probably your business heavily depends on credit, flexible payment plans and long revenue cycle. If you’re meeting demand and collecting receivables on time then going concern is not an issue. However, as you’re dependent on the credit payment plans so any two or three delayed collection possibly leave you in a difficult state.
Everything starts from the planning so before aggressively investing do the cash flow forecast, review your payment plans and marketing strategies and to keep cash flow cycle smooth develop a realistic practical plan and develop a back-up for raising cash such as Diversify client base, use personal references/relationships or through pre-approved credit lines from your bank. Accurate Cash flow forecast is a key to ensure the survival in long run.
2. INEFFECTIVE BUSINESS OPERATIONS:
Increasing demand pushes you to hire more people and improvised your product/services. When business growing too fast then sometimes it’s hard to adhere with your perfect operational plan so you need to be quick, decisive and revised your operational strategy. If you’re not so efficient in hiring process or unable to revise operational strategy then might not be able to meet the increasing demands.
It leads to many operational issues; a few of them are as below;
- Lack of sufficient funds cause delaying in buying the machinery or inventory to fill the demand gap.
- Newly hired employees might be hired in a rush so whether not technically strong or unable to get adequate trainings due to time constraint will further impaired the going concern status of the business.
- Delivery cycle probably not accurately determine so delaying will cause losing customer trust, reduce re-order level and profit margin.
- An inefficient operation causes customer complaints and negative feedbacks which further reduce business goodwill and heavily effect on revenue.
Effective planning, monitoring feedback system, and realistic Human resource estimation will help you to resolve the above stated issues.
3. HIGH SWITCHING COST:
It’s always great to challenge yourself and pushing the limits, but continuously long working hours in the absence of effective compensation and benefits plan will lead quick turnover of your trained loyal employees and it’s hard to fill the gap in no time.
Focus on the evolving workplace culture when growing the business, pay attention to your employees’ issues, practice empathy and offer more intrinsic and extrinsic rewards can be a solution for retaining the key employees and reduce staff turnover.
4. MANAGEMENT MISTAKES:
Getting bigger means you need to be more organized in your operational and cash flow forecast plans. By growing so fast, workload on you also increase so whether you need to delegate more or do by yourself which in the later case will cause stress and further negatively impact on teamwork too.Growing so fast demands more work to do and by doing this probably you focuses on quantity instead of quality, lose focus from the key strategic issues, which leads to more frustration for you and also increases customers’ complaints too. Inadequate control over employees and budget, poorly designed task structure, ineffective sales and marketing campaigns will cause further derail of your business success.
Outsourcing administrative tasks can be a solution for fast growing business.
5. OVERVALUING SALES:
Most of the entrepreneurs think if they take care of the sales, then everything will be manageable and will follow the right track. No doubt, revenue is a useful metric but not everything. A lot of factors are involve when we talk about the sales; market situation, demand and supply economics, expenses and budgeting and HR policies so keep in mind all the relevant information and focus on each factor to make sure business success.
There are a lot of other reasons might cause danger to your fast growing business such as; hiring the wrong people, looking for profit instead providing quality, and technology ignorance.
Business growth is exciting but it’s vital to manage the above stated issues and it’s possible with effective planning so whether you plan well or fail to plan and face rapid growth issues, decision is in your hand.
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