Growth tends to carry a generally positive connotation in business. Whether it's customers, products, or staff, most consider growth to always be a good thing. In reality, there are two ways to look at growth; good (expanding scope, products or operations when in demand) and bad (generating higher sales without the cash to show for it).
Often small businesses fall victim to the thought that "the more the better", when in reality the best way to grow is somewhat slowly. Consistent, controlled growth is a a great business goal.
There are several things to consider when you're business starts growing in any area:
If your expenses are increasing, your sales need to increase in tandem.
- When you're putting growth before actual sales, you're getting the cart before the horse. If expenses are out pacing sales growth, it can create a cash deficiency. Remember that cash is king- if you have cash you can always remain operational. If or when cash flow dries up, you (obviously) no longer have a business.
If you're supplementing salaries or paying payables prior to collecting on your invoices, you're creating a cash shortfall.
- Again, consider the lending aspect. How might supplementing your operational costs effect your ability to get a loan in the future? If you're not able to pay down your current credit lines or can't afford the payments anymore, that's just setting you back in the long term. Your growth could end up costing you more than you think!
If you're juggling too many product lines or services offered, it might not pay off in the long run.
- Focus on your major sellers, and aim to scale your operational expenses to meet the demand of cash coming in to your business.
- Sometimes people confuse "growth" for adding too many facets before your actually ready to meet those needs. That could equal chaos today, and quite possibly unhappy customers and clients tomorrow.
The moral of the story is one we repeat often: running a clean company pays off in the short term, and builds higher transferable value in the long term. If you're company is growing at a conservative rate that you can quite literally afford, you're probably on the right track!
If you need any help creating or maintaining consistent, controlled expansion (aka: good growth), feel free to get in touch with FIVE:thirty. #ConsultingWithCare means coming up with a growth strategy that works for your company and your goals.