Avoiding the mistakes of rapid business growth

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As an SME, you naturally dream of business growth. While it’s great to plan ahead, don’t forget about the dangers of rapid expansion.

1. Watch your finances

Small-business owners often have a good understanding of their finances. As the company grows, it’s harder to keep track. It’s vital to have a trusted bookkeeper. Make sure you have a solid plan for collecting accounts receivable. If you’re dealing in billing and not collecting cash, it’s easy to find your business in a state of needing a debt collector.

As your business expands, it’s easy for expenses to exceed revenue. Keep an eye on cashflow.

When we begin to expand, the tendency is to go on a “spending spree”. Proceed carefully on such things as building expansion or hiring new staff or purchasing new equipment.

Your business may be growing due to an economic boom or an upturn in your industry. But, you need to be prepared for downturn, too. We all know what happened to fibre-optics companies and dot.com enterprises.

2. Avoid drastic changes

Avoid band wagons like “managing by objectives” or “team-based decision-making”. In our zeal for bigger and better, we tend to throw out what’s tried and true.

When we get committed to expanding our businesses, sometimes important things like employee satisfaction, team building, and customer relations get neglected.

Remember: your customers and your employees don’t always adapt to change as quickly as you’d like. Be sensitive to their anxiety. Don’t to let the quality of customer relations slump because of attention to rapid expansion. Even if you are out there winning over new clients, it is vital to keep your present, loyal customers happy.

3. Have a clear plan

Expansion may involve handing over some of the day-to-day operations to someone else. However, it’s important to keep your finger on the pulse of your company. When you are expanding, be sensitive to lapses in your leadership skills.

Make sure they have a clear mission statement. It’s your company’s purpose. It defines what your business does, for whom it does this, and the desired outcome.

Understand how your role has changed as your company expands. You need to plan and communicate clearly where the business is going and how to delegate.

4. Take your time

Rome wasn’t built in a day. Anything worth doing should be done gradually and with a carefully crafted plan. This is as true for growing your company as it is for any other project.

Don’t be in a rush to hire so quickly that you lose quality of staff. On the other hand, there is a tendency in organisations to take a breather, sit back and enjoy the success, and pat yourself on the back. Always consider what you should be doing to take your company to the next level. A company that sits back smugly will be overtaken by one that is attuned to the changing wants and needs.

5. Bigger isn’t always more profitable

Another pitfall is thinking that success is measured in increased sales. More sales does not always mean higher profits. As a leader, you need to do what Steve Jobs of Apple calls “thinking differently”. You need to identify new customer niches and develop new products.

Company growth, whether you are in Australia, Africa or North America requires of its leaders courage to try new things, knowledge of the market, teamwork and excellent communication skills.

With these tips, you can scale your company for growth while avoiding the pitfalls of too rapid expansion.

 

Avi Bendetsky, Managing Director, BAS & MORE Bookkeeping and Virtual CFO