It sounds like a nice problem to have, but business growth which occurs too quickly can exceed your ability to follow through on all those new commitments, and to have the financing in place to accommodate that sudden growth. If you should find yourself in a situation where your company suddenly enjoys a boom period, you may also find that you aren’t quite ready for it. For example, you may not have the cash reserves to deal with all the increased needs regarding supplies, payroll, and expense money. Here are some ways you can avoid being overwhelmed when your business suddenly takes off.
Have a growth strategy ready
Before that explosion of growth happens, it would be a good idea to have a strategy ready, so that you can react to the risks and the new opportunities which may be presented. You can prepare this kind of strategy by analyzing the marketplace, the overall economy, what your competitors are doing, your own internal resources, and your current channels for marketing and distribution.
Forecast cash needs
By analyzing your present inflow and outflow, you may be able to determine future cash needs if both of these were to be significantly increased. If your analysis reveals that you will need additional financing, you should take steps to secure that financing ahead of time.
You can take a hard look at your sales volume, your receivables, inventory valuation, total assets, and your ongoing overhead. If you determine that cash flow is being negatively impacted by carrying too much inventory or too many assets, you should take steps to reduce these.
Improve efficiency of receivables and payables
There are a number of ways you can improve your incoming revenue stream. For instance, you can invoice promptly, do credit checks, follow-up on past due customers, and consider whether your payment terms are adequate to ensure consistent cash flow. On the payables side, you should take a close look at your indebtedness to other creditors, consider paying your suppliers closer to due dates, apply for commercial credit when it makes sense, and consider using just-in-time inventory methods, so you end up carrying less inventory.
Consider your ideal growth strategy
It doesn’t often happen that businesses undergo explosive growth all on their own, without some kind of causative initiative being undertaken. In other words, growth generally happens as a direct result of your own strategizing for it. That being so, it makes sense to give serious thought to what your ideal growth strategy should be. There are number of things to take into account along these lines, including all the following:
- Can your inventory support growth?
- Are production lines scalable?
- Do you have the right management team in place?
- Where will skilled newhires come from?
- Will receivables support adequate cash flow?
- Do you have sufficient capital to finance growth?
- Do you have assets which could be converted into cash if necessary?
- Is your business stable and profitable in its current state?
By seriously examining your company’s preparedness for growth, you won’t be caught off-guard when it happens, and instead you can reap the benefits of that next level of success. BizResults can help you plan and prepare for growth that you can manage successfully. We would love to meet with you and hear your story.
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