For most business owners, the word ‘growth’ is one of the best in their vocabulary. In their minds, growth denotes a successful business. Unfortunately, many entrepreneurs have learned the hard way that growth is a two edge sword. While a growth phase typically means you are doing something right, reaching capacity can cause the chain to weaken and could kill your business.
A small growing firm reaches its capacity limit at some point in their growth process. They either run out of human power, business resources, or capacity to manage operational issues. Once they reach capacity, every entrepreneur has a tough decision – do they believe that this is a true growth phase… or is this merely a spike in work?
If the business owner hires the wrong people, they hurt the business by having staff who are not generating a needed ROI. If the entrepreneur incorrectly rides the storm, thinking its simply a spike in work, the firm suffers by having stressed employees, lower quality, and even a damaged reputation. Growth can be a very difficult process to manage – especially as a small business.
Here are some thing to consider when you’re headed into a growth phase.
* Add systems and procedures
As your business grows, you won’t be able to spend as much time personally checking over details as you did initially. Having systems and procedures in place helps you be sure that management and staff are consistently making checks in the same manner you would have. The more your day-to-day business operations rely on systems and procedures, the more growth you will be able to effectively achieve.
* Watch non-financial limits
Because the lack of money is such an overwhelming barrier to growth, it is easy to overlook other issues that may limit your ability to grow. You might feel that some people on your staff, your computer system, your facilities, or some other component of your business is being overtaxed by continuous growth. If so, don’t hesitate to slow down the pace of growth for a while until you feel that that component of your operations is running smoothly again. It takes a wise, disciplined manager to hold back on rapid growth to ensure that the company can continue to deliver quality products in a professional manner.
* Invest in yourself
In the early stages of your business, you'll likely see a very lean profit margin so any money you do make should go directly toward helping you grow. Early growth is is directly affected by a company's ability to invest in itself. In the early years, it's critical to make sure that you're redirecting any revenues back into the company. Invest early and heavily in order to grow quickly.
Your employees have direct contact with your customers, so you need to hire people who are motivated and inspired by your company’s value proposition. Be cheap with office furniture, marketing budgets and holiday parties. Hire few employees, but pay them what they are worth. Having a trusted, solid team that will be there for you when hours get long and stress gets high will be well worth the investment during a growth phase. Be aware of certain rules for the numbers of employees as well. For example, non-construction businesses with 4 or more employees need to have workers compensation insurance, while construction related businesses need workers comp for any number of employees.
There are many, many strategies to managing growth. The most valuable advice is for you to actually sit down and analyze your business. Determine your growth, how it is affecting you, and what steps you need to take to cope. If you have questions about managing growth, contact Jones & Company CPSa P.A. for guidance.