It’s quite an experience to be part of a fast-growing company. Success can attract more success, which can help catapult a company onto the Inc. 500—or maybe even onto the Fortune 500. But coupled with the benefits of fast growth can come tremendous risks. Some of these risks can be easy to miss, which can make them even more dangerous to the health of your company. Higher sales can mask the dangers that lurk inside a company that hasn’t prepared its business operations to absorb rapidly increasing sales.
For companies that have been blessed with rapid growth, it’s critically important to ensure that your operations can handle it. A company can quickly become overwhelmed with too much growth in too little time which puts it in a perfect position for bankruptcy. These areas require the most attention during periods of rapid growth:
Rapid growth can consume tremendous amounts of cash. Your company may require cash to expand its business operations to fulfill its contracts, which in all likelihood won’t pay until 30 to 90 days after you have delivered. (Customers seldom pay in advance.)
If your growth rates change monthly, it can be difficult to determine exactly how much cash you’ll need over the next 12 months in advance. Underestimating this amount may lead to a cash shortage, which can hurt your ability to execute on customer projects.
Sometimes growth happens very quickly because of pricing. Many owners may also feel the pressure to lower prices when their growth rate starts to dwindle as a way to sustain an unsustainable rate of growth.
Using a low price as a way to entice many customers can help grow revenues, but it may leave little profitability. Those profits are what you can reinvest in your business to help fund future expansion and to command a higher valuation. It can also help access lower-cost financing, which can assist with cash-flow management.
Human Resource Management
Fast growing companies need talented people. Finding the right person for a job can be a challenge; finding dozens of them every month on a consistent basis can be considered nearly a miracle.
Many companies commit the error of lowering their standards when it comes to hiring in order to keep pace with their growth. This can damage the company's culture and may eventually lead to poor performance. From the onset of rapid growth, it may be worthwhile to first hire a high-level executive with experience and contacts for quality recruiting.
An inadequate technology infrastructure can be a hindrance to a fast-growing company and its business operations. Slow computers and database management software, the lack of mobile compatibility and outdated network infrastructure are just some examples of technology that can do more harm than good.
Many new solutions are scalable and come with variable pricing based on usage. Rather than try to work with an outdated information technology infrastructure, consider updating what you have so that it can better serve the needs of your employees.
With additional customers, sales, suppliers and employees can come additional risks. An accident or other circumstance could lead to a situation where your company is being sued. Yet many companies fail to increase their insurance coverage or add additional lines of insurance to reflect their now much-larger company. In addition to insurance protection, a fast-growing company may want to consider establishing formal policies and procedures related to risk management before a problem occurs.
For more tips on expanding your business, access Business Growth: How to Survive and Thrive, from MSNBC’s Your Business.
Read more articles on operations.