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Is There Such a Thing as
  • 25 October 2016
  • Eric Michaels

Is There Such a Thing as "Too Much Growth?"

Business growth occurring too fast sounds like a great problem to have. Many companies struggle to make it out of the start-up phase and become established, so rapid expansion is usually at the top of an entrepreneur's wish list. Who wouldn't want that?

There is such a thing as too much growth, however, particularly when your company starts providing less effective customer service or finds itself short on cash when suppliers suddenly send a larger bill. If you're not prepared to handle it, you could lose the gains as quickly as you made them. Here are some tips on how to successfully manage quick expansion.

1. Keep an Eye on Cash Flow

When your company is off to the races, there's a tendency to go with the flow and assume higher volumes will solve any and all problems a business may face. But this only works when money is steadily coming in and your income-to-debt ratio makes your accountant happy. Problems arise when customers are late paying invoices, when a loan request is denied, when a client leaves, or when you don't charge enough for services.

Before you invest in more staff or equipment, make sure you can cover debt payments for several months—even in the worst-case scenario of multiple clients dropping your company simultaneously. Too much growth often means too much debt, and creditors will only wait so long for payments before taking corrective action.

2. Get Your Team Ready

When your company kicks into high gear and begins expanding rapidly, the fast pace and busy atmosphere will be quite obvious. Make sure you prepare employees for the rush before it happens. Explain that you may not be able to communicate as frequently as you'd like and assure them there will be bonuses and promotions if your company handles the leap with grace. Otherwise, employees can feel taken for granted when the business booms but their salary remains the same. With incentives and the chance to rise to a higher position, you can encourage better performance and handle the expansion in stride.

3. Stay Close With Clients

With rapid expansion, an unprepared company may lose touch with its original customer base and find itself without a crucial stream of income when larger invoices arrive. The signs are obvious to your clients. Overwhelmed businesses tend to decrease production quality, delay shipments, and take longer to respond to customer concerns. Any of these failings can mean the end of a relationship with important clients.

As the leader of your company, make client relations a top priority and respond to quality control issues immediately. Your best customers will not hold your rapid expansion against you, but they will expect the same level of service they received in the beginning. If you want to succeed in the long term, meet, or better yet, exceed their expectations.

4. Maintain Your Core Business Focus

Seeing your opportunities multiply might spur ideas for new services. For example, a company supplying decorations for weddings might be tempted to take on contracts for birthday or retirement parties. While the plan might work, you may run the risk of losing focus on your core business when trying to branch out into an area where you have little experience.

Before committing resources to a new branch of your business, make sure you can maintain your profit margins and deliver on your promise to clients the way you have with your core business. Otherwise, you're better off sticking to what you know best.

There is such a thing as too much growth. Before you leap, do your due diligence and be ready for potential stumbles on your way up the ladder.

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