What would happen if your business suddenly experienced rapid and significant growth? My guess is that many of you are thinking that this would be great news. But – don’t be so fast to welcome it.
- Would you and your organization be prepared, and have a plan?
- Could you manage that growth effectively and profitably?
- Do you have enough cash to support and fund it?
There are three key challenges that come with growth, including Management, Cash, and Operations. All must be planned and managed properly, so that the business can continue to operate profitably through this period, and reap the reward. Each area is briefly described below, including some questions that you may want to consider in planning for your next growth phase.
As a business grows, the activity levels and complexity increase significantly, and need to be managed and controlled properly.
- How much activity and complexity can your current Management team handle effectively, without losing control of the business?
- At what point will your organizations’ internal capabilities,capacity, and resources become overwhelmed with the increased pace, resulting in the operational issues described below?
- Is your organization’s team, capabilities, capacity, and culture, capable of absorbing the increased activity and complexity, and to what level?
Growing businesses require more cash, especially in the early stages, to fund and support the higher business level, as receivables and inventory rise, and the cost of doing business increases over time.
- How much cash will be required, and will the business have the ability to generate these requirements?
- If not, will the business be able to qualify for additional funding to meet these requirements?
- Note: If the business is not able to obtain additional cash, it will need to make a decision regarding how much additional growth, if any, it can take on without experiencing ongoing cash “crunches”.
- What investments and costs will be required to support the increased business and activity, and service customers efficiently and effectively?
The higher activity level, and complexity, will normally require increased capacity and capabilities, and more effective, streamlined processes. If these are not in place, the business will experience increasing customer, service and quality issues, and higher costs.
- Can your existing systems and processes handle the increased activity?
- Note: In many instances, these systems and processes have grown with the organization over time, and may have a number of “band-aids” in place. As the operation is stressed, these “band aids” will start to pop off, one by one, leading to further breakdowns in service and quality.
- Will you need more staff? How many, and with what capabilities and experience? How will you train them.and how long will it take for them to become effective?
- Note: In many situations, hiring is reactive and after the fact, leading to poor decisions, high turnover, and increased operational issues early on.
Those businesses that have planned properly, and prepared, will take the growth in stride, and continue to grow profitably.
The businesses that are unprepared will find themselves drowning in activity, out of control, and unable to cope with the requirements, demand, and complexity of the business. As service and quality problems increase, customers will be disappointed and leave, revenues and cash flow decline, costs increase, and profitability disappears. If corrective actions are not taken quickly, the business could enter a death spiral downward, and eventually close.
Be careful of what you wish for, and plan now for your next phase of profitable growth.
If you have any questions, or would like to discuss your organization’s specific issues, please call us at (727) 637-4666, or email me directly at Don@HuttlinAssociates.com.
“Whatever made you successful in the past won’t in the future.” – Lew Platt, CEO, Hewlett-Packard
“You can’t have a better tomorrow if you are thinking about yesterday all the time.” – Charles Kettering
“Failing to plan is planning to fail.” – Alan Lakein