As ironic as it sounds, companies can be crushed by their own growth. Quick growth is what every businessman craves for his/her business.
Just that many of them get found out when growth hits them in the face. Soaring orders, inflating customer counts, expanding product lines – everything is great, only if you are able to manage the growth.
Apart from higher amounts of working capital, your business will need a larger team, and adroit process management to keep up with the demands of growth.
Here’s how a startup or small business can prepare for its growth phase without risking its downfall.
Ask The Right Questions
Nothing opens up your eyes to the realities of growth like some well-worded questions. These questions force you to think beyond your to-do list, and clearly evaluate your business’ readiness for fast growth. Some of these must-ask questions are:
- What’s my growth goal (be specific; for instance, record 25% growth in profit-after-tax by end of current quarter)?
- Do I have the adequate team size (hiring too slow or too fast come with their unique pitfalls)?
- Do I have assets that I can liquidate for cash?
- Am I collecting my receivables fast enough?
- Is my inventory in sync with my growth?
- Do I have the capacity to keep up with the demand?
Keep Existing Customers Happy
Instead of focusing on the competition, focus on the customer and ultimately you will succeed. Particularly for businesses whose growth is fueled by acquisition of a large number of new customers, it’s super important to make sure that the existing pool of customers keeps on getting the same quality and volume of service/product fulfillment. Taking on new customers is a must, but not at the cost of risking the exodus of existing ones. Some key points to remember:
- Don’t just trust your gut; leverage tools such as surveys and opinion polls to make sure your current customers are as happy as they were when your business was a mere entry level startup.
- Identify key product/service/experience attributes that customers value and cherish, and make sure you don’t compromise in any ways on these parameters.
- Make your supply chain and fulfillment processes robust enough to tackle growth without failing to meet current demand.
Think of ‘Leverage’, Always
The secret sauce of startup entrepreneurs that are able to manage and sustain growth for long periods is that ‘leverage’ is a key aspect of their management and strategy. Leverage is all about multiplying the impact of your efforts. Here are some examples:
- Exercising your networking skills to get quick access to key people, preferential prices, and priority access to resources (it’s time you became super serious about your LinkedIn game)
- Choose the right communication platforms to connect with customers, employees, and investors via branded webinars (be smarter; use your recorded webinars for video marketing, its transcript for your blog post, its audio extract for a podcast, and a presentation deck to go on Slideshare)
- Eliminate non-value adding processes, and invest the saved man-hours in more value adding tasks (Donna Morris, senior VP for Human Resources at Adobe, did this by eliminating performance reports and freeing up man hours for more useful work)
Estimate The Financial Backing Your ‘Growth’ Needs
The biggest mistake that makes ‘growth’ a bad memory for businessmen is to leave financial planning for later. On the contrary, you will need to be proactive with financial planning to be able to manage and then sustain your business’ growth.
Not only working capital, but also your business could need more money to purchase better equipment, more tools, look for premium raw material providers, hire more employees, and invest in your supply chain. Some of the options you have are:
- Restructuring your existing debt
- Opting for short term loans which typically can be obtained between 3 to 12 months.
- Selling off some liquid assets for cash
- Selling equity
- Get working capital financing
Ramp Up Your Manpower and Cumulative Skill Set
Growth will shake things up; be very sure about it. How do you expect your employees to react when you suddenly expect them to work 2 hours more per day, and ‘forget’ about taking leaves for some time? You can’t risk being left with unsatisfied, demotivated, and worse of all, lack of employees when your business needs them the most. Anticipate the incremental manpower you’ll need to manage growth. Some key points:
- Communicate the need for current employees to stretch to practical levels, well in advance.
- Stay away from leadership ego and use tactics such as volumes-linked incentives to motivate employees to go the extra mile.
- If you’re not confident about the sustenance of growth, hiring full time employees can be risky; instead, hire contractors.
- Ramp up your resources by bringing in some freelancers and virtual assistants on board.
Matching Receivables and Payables
You can overcome a major chunk of the financial stresses of quick-growth by matching your receivables and payables. To manage your receivables, begin by bolstering your credit check processes for customers. Make your payment terms clear, and uniform. Think of better collection methods than basic dunning letters. For customer accounts whose credit limits can’t be ‘shrunk’ without causing fire, reduce the collection times.
You can then start looking for leeway with your payables also. Consider reworking your vendor contracts to get more time to pay your dues. Check whether your finance department is totally using the credit limits and payment time frames your company is offered with. Also, you could look to join a purchasing group to get better rates on office supplies.
Bootstrapping your business is very different from managing it when it’s growing. To make sure your business’ growth doesn’t crush it, trust the tips and tricks mentioned in this guide, Happy growing!