Managing a fast-growing business presents both opportunities and challenges. The chance to become an industry leader is attractive, but it comes with the risk that demand will outstrip capacity.
To avoid that pitfall, you need a strategic plan that’s backed by adequate financing, empowered employees, and the right information and communications technology.
So how does a company grow in just a few years, from a three-man working team operating out of a shed, to a well-established brand name and sector leader?
Defining your growth objectives
Be strategic about your growth. It’s a good exercise to first ask yourself some very basic questions in order to determine your key objectives.
- Am I having cash flow problems, or am I managing well? For instance, do I have assets that I could turn into cash if need be?
- Am I collecting my receivables fast enough?
- Do I have the necessary capital to finance my growth?
- Does my management team have the right competencies to handle my company’s growth?
- Am I growing because I want to be more profitable or is it growth for growth’s sake?
- Is my inventory in line with my growth?
- Am I expanding too quickly?
- Is my production line efficient?
- Am I hiring too fast?
Conduct a growth diagnosis of your company
Essentially this means analysing how you manage your company and how to control the aspects of your business that affect your cash flow. Generally, a comprehensive growth diagnosis includes an analysis of your sales, overhead, receivables, inventory and assets.
Try to assess whether your inventory and capital assets are absorbing too much of your cash flow, if they do, take the necessary steps to tightly control them. This will help you define your refinancing requirements and help you avoid future liquidity problems.
Rapid growth is a doubled-edged sword
Such a sudden rise may sound like a dream come true, but for the unprepared, it can be the end of a business.
Fast growth can be a doubled-edged sword for entrepreneurs. The opportunity to expand and make more money will be lost if demand outstrips capacity, leading to disgruntled employees, strained client relationships and sub-standard products or services. That’s why it’s vital that business owners step back from the daily routine and ensure their fundamentals are in order.
Fast growth can damage your company if it’s not well-managed. You must define your growth objectives, then decide how much growth you can support and how much financing is needed to support that growth.
A well-planned growth strategy
EFM Growth advises companies experiencing fast growth to begin by creating a growth strategy that identifies the human resources, processes, tools and information systems needed to meet targets.
Expect to introduce new information and communications technology to improve your sales, productivity and financial controls. You should also plan for expanding facilities, adding machinery or hiring new talent.
A successful growth strategy depends on a flexible management structure which will allow your business to respond quickly to market demands.
Our team of EFM Growth business advisors are here to support you, your team and provide the best solutions to help your business achieve sustainable, smart growth. Get in touch by email or call 01582 516300.