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Growing your business the right way
Every business owner wants their business to grow – that’s a given. But there’s a right way to grow your business, and there’s a wrong way.
First, what defines growth for a small business?
A growing business sees an increase in revenue spurred by growing consumer demand. Revenue and cash flow are growing at a rate faster than the overall economy.
Ultimately, a growing business is self-sustaining: Not only are you able to take a salary, but you are able to re-invest in the business, allowing for even further growth.
Good Growth vs. Bad Growth
It can be exciting if, all of a sudden, your product is getting attention – whether through an advertising campaign or a successful viral campaign. You’re almost definitely going to see an increase in sales – possibly a big increase.
And while that seems like it’s all positive, it can turn negative very quickly if you’re not careful. Some things you want to consider before you try to grow too quickly:
Make sure your product lives up to the hype.
If you’ve run a campaign that makes a promise, then your product had better deliver. Otherwise, all of your new customers are potential naysayers for your product, and your company. Make sure your customers are getting what they were promised.
Make sure you can handle the volume if sales start to increase dramatically.
Your campaign just got people really excited about your product, but you can’t get things shipped out quickly enough. Or, even worse, you don’t have enough inventory to fill your orders. Now your new customers have to wait. Not only will that leave a bad first impression, but it may also be costly to ramp up production, or to hire extra people to service your clients.
Don’t forget about customer service.
Keeping up with increased demand can be difficult even when growing your business at a slower pace. An “overnight success” may well ruin you. If you can’t provide excellent service to your customers, you’re going to lose their goodwill. Not only are they unlikely to buy from you again (or cancel or return their order if possible), but they’re also likely to shout from the rooftops about your poor service.
Don’t lose sight of your long-term goals.
You may double your business in one month, and the cash may be rolling in. But you have to make sure to step back and evaluate your long-term strategy. Is now the time to invest in more employees or equipment? Is product line expansion the next step? Be cautious when your business experiences a sudden, major growth. You need to make sure that growth is sustainable – and consistent – before you consider your business an “overnight success.”
Growing quickly comes with risks
When running a small business that is growing slowly, most business owners have a pretty good handle on day-to-day operations, financial data, etc. But as your business grows, these things need to be delegated more and more. When you grow quickly, the transition from knowing all the ins and outs of your business to being clueless about how much money is in the company checking account can be almost non-existent.
If your company has experienced rapid growth, here are a few things you should do to make sure you avoid the typical hazards of growing too quickly:
Don’t make increased revenue your only focus.
More sales can come with more problems, like requiring more staff, equipment, etc. So, it’s entirely possible that your increase in sales may not lead to an increase in profit – in fact, you may experience a decrease in profit. Keep your focus on the big picture to make sure you’re making good decisions for your company’s future.
Meet regularly with your accountant.
A good accountant is important in any business. But your accountant becomes increasingly important as you grow. Your accountant will help you see the reality of your finances, and can help guide you in deciding what to do next.
Keep customer service at the forefront.
You need to make sure your customers get the same service they did before your company doubled its sales. It takes a lot to gain a customer, and it’s very easy to lose them. So make sure you don’t lose sight of the people who are contributing to your company’s success.
Keep track of your receivables.
This may seem like a no-brainer, but we mentioned before that sales growth can often come at an expense. If you’re selling on terms rather than getting paid up-front, you’re now waiting for the money to come in – but you may have had to pay for raw materials, employees, etc. in order to fulfill your sales commitments. Now, you’ve spent more money, but could be waiting 30-60 days to get paid. Again, this is where an accountant can help you manage your finances a little bit. But remember, it’s ultimately up to you to collect that money, so make sure you don’t let it get too out of hand.
Growing a business is hard work. What’s even harder is to see a growing business end in failure because it grew too fast, or wasn’t managed well, If you pay attention to your systems, your staff, and your cash reserves, you’ll likely weather a period of rapid growth, and be able to turn that into long-term, sustainable success.
Apr 28, 2015
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