Growth is a good thing and a goal most businesses have from the outset. Some businesses grow by expanding into new territories, others into new markets, and some just scale up their existing operation to meet higher demands.
However, some businesses may find themselves in a period of rapid growth that wasn’t anticipated, such as tech start-ups who find a niche in the market or develop a product that is ordered en masse by wholesalers. Whilst rapid growth suggests success, that growth needs to be managed properly so that the business can continue to operate to the same high standard.
Here, we take a look at how to manage rapid business growth.
Understand the causes of growth
There are many different reasons that your business could experience rapid growth, and your first step towards managing that growth is to identify what those reasons are. Has your product or service found a niche in the market and, if so, how big is that market? Have you recently had some high-profile exposure that has drawn in business? Are consumers ordering in a higher volume than you anticipated? You need to know the cause of growth if you are to work towards sustaining it.
Outline your objectives
If your business has experienced rapid growth, you may have already hit certain targets or goals that you hadn’t expected to reach yet. Compare your current success to where you predicted you’d be at this stage and how that affects your strategy going forward. If you have already reached certain targets, what are your new objectives? Whatever these new objectives are, ensure you have the capacity to keep up with them.
Keep an eye on your cash flow
In times of rapid business growth, managing your finances is essential. Growth can result in cash shortfall as your outgoing costs increase to keep up with the demand. Rash spending decisions to try and catch up with the growth can incur long-term problems, so develop a backup strategy for keeping the cash flowing, such as personal investment or pre-approved credit from your bank.
Carefully assess your needs for new employees
If you foresee your business continuing to experience this high level of trade, you will likely be thinking about scaling up. Before you begin hiring, carefully assess your needs – which departments or roles are struggling to keep up with the workload? If you need more employees, create a robust hiring process that attracts qualified individuals who share the same values that contributed to your initial success. You should also ensure that your training program reflects these values.
Have a watertight invoicing process
Ensuring that you get paid on time is essential to managing your cash flow in times of rapid business growth. To achieve this, you need a watertight invoicing process that leaves no room for errors. Using sophisticated invoicing software such as Xero or QuickBooks makes it easy for clients to pay you and will help you to send out invoices on time, in bulk, and send reminders automatically. Online accounting software such as ours can be integrated with Xero or QuickBooks so that you can view everything in one place.
Assess the efficiency of different business areas
In this period of rapid business growth, how efficient has the business been? In times of increased demand, you can lose sight of how effective your processes are. What may have worked when dealing with a lower volume of trade may be inadequate now. Are there areas of the business that haven’t been working and would the finances to support those areas be better placed in areas that contribute to the causes of growth you’ve identified?
Make sure your business growth levels are sustainable
When you are working to understand the causes of your rapid business growth, you should also be able to identify whether that growth is sustainable. If you are trading in a limited market or your offering has no repeat business value, you may soon reach a plateau. If the initial buzz around your product looks to wane, you may want to invest in marketing to keep people interested. While many types of business growth are sustainable, don’t forecast for your growth to increase at the same rate if it is not.
Managing rapid business growth comes down to understanding the causes of growth and making strategic decisions based on a realistic forecast of your business’s future. Scaling up as an automatic response to early success could leave you in financial trouble later on, so ensure any decisions you make are based on sustainable growth.
For more information in this area, you can take a look at our guide on preparing your tech startup to scale up.