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How to manage the risks of growing too fast

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When you create a small business one of the things that you may see happen is your sales start to grow and grow and before you know it, you have outgrown your location and your staff is struggling to manage risks appropriately. The deal with rapid growth is that although it is wonderful for your sales, it is really hard on your employees and if you do not take care of it appropriately, rapid growth can easily ruin your company.

How can growing actually hurt a company? When you grow rapidly you are often spending a lot of money in order to produce the products and just to keep the company afloat. When this happens you run out of cash quickly because you may not have someone on the billing side getting after your customers with the past due invoices and this leaves you cash poor.

As sales increase it will also lead to an increase of your balance sheet and it is critical that you manage this so that you will be able to fund the products and things that must be made in order to maintain the growth.

As the owner of a small business organization it is your job to maintain control over the books and to really watch your balance sheet. If you see that you have variable assets like cash, inventory, pre-paid expenses, and accounts receivables that are increasing thanks to your sales, you need to work on managing all of these different areas right away. When one changes, it will impact the others in some way so you need to be prepared to understand what needs to be done.

What you really need to do is to learn how you can spread your resources correctly. Since you have certain assets and things you must be able to find a way to quickly increase manpower to the company in order to handle the sales. This can be challenging as you need to get these people up to speed in a hurry and at times it causes you to lack in other areas like thorough training.

Watch out for quick expansion. Some companies will get in over their head and when they see their sales start to boom they think that it means it is time to expand. In many cases this means it is not the time to expand at all. It means you need to save and watch for some risk that is bound to come your way.

At the current time your company may be booming but in a year, you might not be in this same position. Always watch for the future and the many changes that it can bring. Calculate your variable asset percentages in order to see what type of sales growth you can look forward to in the future. It will be a wise idea to sit down and do weekly cash flow projections to help you see where you are at with your money.

Save the money into accounts for rainy days as you never know when the cash cow will stop. Since it can be easy to let rapid growth overtake you, hire people that are really good multitaskers. This way they will be able to help out with the packing of products in addition to doing marketing and other things. As a small business owner you do need to live with an "all hands on deck" approach. Creating a business that works as a team is the key to small business success. You will all be there to support one another and it makes it a cohesive working environment.

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