Managing rapid growth: Maintainable growth for long-term business health
Tuesday, 9 July 2019
Business is growing like crazy. Great news, right?
Maybe. If you're like many entrepreneurs, growing too quickly in just a short amount of time can be a death knell. While you're racing to meet the growing demand, new hires and capital investments can be made in haste. You can lose focus on what made you successful in the first place—and quality can suffer. It can also be easy to over-leverage your business if you're in a frenzied state of optimism. What happens when the cycle swings back and you find yourself with high overhead and mounting debt?
To avoid those common pitfalls, consider these tips:
Plan how you'll finance growth thoroughly
If you're expanding, you will likely need capital to keep pace with demand. Before taking out a loan or bringing in investors, look for other ways to free up cash. Collect on outstanding invoices, liquidate inventory, or lower overhead by moving into a less expensive facility—all while researching your financing options at the same time. The goal is to free up capital without over-leveraging in the event the current growth spurt is just that—a spurt. Whether you're freeing up existing capital or acquiring new monies, do it gradually, and avoid bringing in a heap of cash if you're only going to sit on it.
Drill into metrics
More than ever, you must understand your gross and net profit margins, customer acquisition costs, lifetime value of a customer, aging accounts receivables, and net profits. By understanding these performance indicators, you can make informed, thoughtful decisions about expanding expenditures on hiring, facilities, marketing, and other key functions.
Above all else, be laser-focused on customer service
If the consumer experience remains excellent, you are more likely to stay on the upward curve. Invest in quality hires, partners, and technology, and measure the return on investment (ROI) on these assets by tracking detailed customer service feedback.
Keep an eye on the long term
Rapid growth can be exhilarating, so enjoy that moment. But rapid growth can also mean putting out a lot of fires—address those quickly. But never lose sight of the big picture. Set long-term goals and track market forces, and put those big sales and crisis management into the proper context.
Outsource and partner
When you launched your business, you were likely doing everything yourself—handling payroll, writing the Facebook ads, drilling into analytics, and making sure the bathrooms were stocked with liquid soap. But now you should be handing off those duties to experts who can not only do that job better than you can, but also free you to focus on your core competencies.
Think of flexible solutions
During the upswing, focus on solutions that allow you to scale up and down easily, and with few ramifications in case you face a down cycle. Consider hiring contractors and freelancers instead of staff employees, and if you need increased office space, turn to co-working facilities that allow lots of flexibility and support services.
Don't be seduced by investors
When business is excellent, it's common that investors will come knocking, but don't jump on the first sexy offer that comes your way. These potential deals often take lots of time, effort, and energy to entertain—and unfortunately, these deals sometimes result in nothing.
The content provided is for informational purposes only. Neither BBVA USA, nor any of its affiliates, is providing legal, tax, or investment advice. You should consult your legal, tax, or financial consultant about your personal situation. Opinions expressed are those of the author(s) and do not necessarily represent the opinions of BBVA USA or any of its affiliates.
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