Can rapid small business growth actually lead to failure? Absolutely. Businesses close their doors every day because of too much success too soon.
Keep an eye on your cash: Customers that provide large, unexpected orders aren’t always willing to pay cash in advance.
- Calculate how much cash your business needs to fulfill your new order volume
- Don’t divert cash from your current options to pay for the new growth; your new customers may not pay you on time or at all
- Obtain financing to cover your cash needs and include healthy margin of safety of at least 10% for surprises
Keep an eye on your customers: New, large customers are attractive. Make sure they are real and don’t ignore your bread and butter customers that have been with you since the beginning.
- Run a reference check and financial background check on any customer that will represent more than 5% of your sales
- Make sure that large customers have some skin in the game; require non-refundable deposits and milestone-based payments
- Go out of your way to be responsive to your existing customers that its business as usual or better
Keep an eye on your people: Not everyone can handle the pressure that comes with rapid growth. One weak link can sink your new success:
- If you haven’t done so already, identify potential leaders from among your staff and give them additional responsibilities. Tomorrow’s general will come from today’s soldier.
- Put your ego aside and assess your own ability to manage the new growth. Achieving the first $100,000 in sales doesn’t automatically qualify you to handle the next $10 million.
- Fight to keep your company’s culture. More people coming in quickly can dilute the culture that made you successful. Once lost it can be impossible to get back.
Reality check: Determine Whether Your Growth Is Good
Sometimes small business growth isn’t good … or even real. Ask:
- Is the growth is sustainable or just a temporary bump?
- Do I know the customers behind the growth? Can they afford to pay?
- Will there be increased expenses? Do we have the cash to cover it?
- Will revenue cover any increase in burn rate?
- Does the new growth mean reduced profits?
