5 Pitfalls of Rapid Growth and How to Avoid Them
Business failure isn't something you want to think about when you start a business. But if you want your business to succeed, you need to know and avoid these 5 pitfalls of rapid growth. Here are some highlights to get you warmed up:
A company that grows much faster than expected can cause headaches and stress at a time when any business owner would prefer to be celebrating. While some businesses manage to transition from niche to mainstream by scaling with ease, others struggle to maintain their identity and high standards of customer service—and eventually, their profits. With these problems in mind, I’ve outlined some of the pitfalls of rapid growth, and how you, as a successful business owner, can avoid them.
Lack of a business-growth strategy
At the start of a business’ life, the owner is more likely to be thinking about how to stay afloat than what to do in the event of rapid growth. You will probably have short-term goals, and possibly a big-picture dream, but no strategy depicting how you will get from one to the other.
Avoid encountering problems in the form of fast-paced growth by planning how this might impact your financial and human-resources requirements, as well as the day-to-day operation of the business. It’s important to consider how what’s currently in place can be adapted to meet needs in the future. As the adage goes, “fail to plan, plan to fail.”
Minimal understanding of the financial impact of rapid growth
Many small businesses operate under the impression that the more sales they achieve, the more profits they will gain—and consequently, growth is the goal. This is true when the journey has been carefully thought out, but it’s still important to understand the broader implications of growth.
Achieving more sales means more production is required, which means more staff, machinery, and overhead costs. These demands can often run ahead of working capital, and many companies stumble when presented with their first tax bill due to insufficient reserves. To keep track of this, company owners should put in place effective financial-monitoring systems which measure all the items involved: the cost of materials, machinery, staff, marketing and customer acquisition, premises overheads, packing, and shipping. Only with a good understanding of all these aspects can a business owner get a true picture of the profit and value of the business.
Inefficient leadership and staff
When it comes to coping with rapid business growth, your people are your power. Everyone working at the business should be flexible and adept at working under pressure so that the business can survive any unforeseen periods of growth. This is particularly true of senior staff.
Business owners should consider the skills and leadership styles of their existing management team and ensure that everyone in a senior position is able to drive the business forward. Managers should be able to deliver the same high standard of work at any given time and have the initiative to think quickly and react to evolving requirements.
It’s also important to carefully hone the onboarding process for new recruits. When a business is growing rapidly, it’s imperative that the right additional staff are hired to enable the company to continue to prosper. While you might need a quick turnaround between advertising and hiring new staff, attention must be paid to the onboarding process to make sure the best applicants are recruited. Studies show that a strong onboarding program can boost new-hire productivity by 70%.
Want to know more? Head on over to the full article here for more ideas and perspective. Afterwards, why not drop me an email to share your thoughts at [email protected]; or call me on 0467 749 378.
Thanks,
Robert