Is your business growing too fast? How to mitigate the pitfalls

Is your business growing too fast? Yes, there is such a thing and here’s how to avoid the pitfalls

If there’s one thing every small business owner dreams of – it’s probably rapid business growth. However, owners rarely consider the flipside of rapid growth. What are the risks of business growing too fast? At a minimum, the business will end up like the gangly teenager tripping over his feet because he shot up too quickly; at its worst, growing too fast can result in a business buckling under the pressure towards a rapid demise.

Now let me make this clear, business growth is definitely a good thing. It’s a measure of validation for your ideas and all of your hard work – and that of your employees. It also means more revenue for you.

However, when your business is growing too fast, your growth gets in the way of running your business effectively. And the trouble is, most businesses are too busy enjoying their business growth to notice these issues sneak up on them – until it’s too late.

Business growing too fast? Here are the warning signs to look out for

So how do you know that you’re business is growing too fast? Just like your own personal health, it’s critical to the success of your business that you identify when the long term health of your business is at risk. As a small to medium business owner, you should be on the lookout for the following warning signs:

• You’re too busy, but for the wrong reasons, you’re not doing what you’re good at;
• Your customers are not happy;
• Your staff are stressed and working longer hours;
• The “systems” you have always had in place are not working;
• You run out of “cash” and your supplier relationships are being tested;
• You start chasing “turnover” instead of “margin” to keep the “engine” fired up;
• You don’t have any resource available to follow up good opportunities, because your money is tied up elsewhere; and
• You can’t get critical up-to-date information to support key inventory decisions.

Do any of these sound like you?

If so, you need to take action and seize back control over your business – for the sake of its longevity… why?

What happens when your business is growing too fast

It’s important to control your business growth because when your business is growing too fast and unexpectedly, there are a number of ways it can damage your business. Over my 35 years in the industry, here are the five biggest risks I’ve seen businesses face when they’ve grown too fast:

1. Cash flow crisis – With rapid growth placing a focus on sales, mistakes are more likely to occur in stock management. This often involves investing in the wrong stock, stockpiling, not adapting fast enough to the fluctuation in the exchange rate, losing track of profit margins. Although sales may be rising, businesses often fall behind on collecting payments from debtors and when that happens, it won’t be long before monthly expenses overtake operating credit, and the business is left with no other option than to shut shop.
2. Outgrowing resources – Growing faster than the business can handle, with more customers than the workforce can effectively serve. Due to inefficiencies, where systems are not keeping up with the business growth, staff are likely required to conduct more manual work and end up frustrated.
3. Unsatisfied customers – It is common to see staff stretched across too many customers and unable to serve all their needs effectively, often not providing them with the ideal product solutions and at times exceeding credit limits. This focus on driving sales can at times be at the cost of keeping current customers happy.
4. Misplaced focus – When a business is growing too fast, it’s often because they lose track of their long term objectives. They focus on short term growth and $$ – as oppose to aiming for long term sustainable growth.
5. Lack of control – When a business has 2 customers, it’s easy to keep track of their requirements, orders, and shipments. However, when a business has 200… it’s not so easy to maintain visibility. This drastically increases the risk of errors and the inability to fix an error efficiently when it occurs.

What you can do to control your business growth

The answer lies in leveraging the right technology to help you manage your business growth. The right technology will enable you to efficiently and effectively serve your existing and new customers without overworking your staff, manage cash flow, and create a long term plan for sustainable growth.

The lack of a scalable, integrated solution that is capable of supporting your business growth is often a key impediment and can prevent your business from achieving sustainable business growth.

Specifically, the right wholesale business management solutions will help you:

1. Control debtor payment collections and gain visibility of your cash flow.
2. Create efficiencies to reduce the burden on employees and better customer expectations.
3. Access information at your fingertips to meet customer expectations. As well as, reducing order to consumer lag times by easily reporting on stock levels, items overstocked or those that need to be replenished based on sales averages and lead times.
4. Know the previous price by customer and customer buying trend, enabling you to set prices based on a long term pricing strategy. This should help you ensure that your margins are profitable.
5. Track any item of inventory based on its main number, the supplier’s number, its barcode number, category or its description.

Finding the right solution to help you control your business growth

As you may be aware, the Micronet Distribution System integrates all aspects of your supply chain and inventory management, from the time an order is placed until it is delivered to your customers. This functionality allows you to:

• Achieve total visibility of your cash flow and efficient debtor / creditor control with Micronet’s Debtor & Creditor Ledgers. The Micronet Debtor Ledger maintains customer information, while providing online customer pricing and debtor control.
• Leverage a single integrated and automated accounting, distribution, warehouse, and sales solution. This drastically increases the efficiency of businesses that previously had separate systems for each component.
• Streamline business processes and improve your supply chain with the Micronet Warehouse Management system. Eliminate the middleman – you can tap into the knowledge of experienced Micronet staff directly as opposed to dealing with a reseller.
• Dramatically improve your ability to provide accurate, up-to-date information on the status of individual customer orders and streamline your business processes. Items are automatically priced for you as per your customer’s pricing matrices. Special and nett prices can also be applied.
• Handle your inventory more accurately, reduce operational costs, improve decision making, and real time visibility into inventory management with Micronet’s Warehouse Management system.

I hope these recommendations help you when you work towards controlling your growth to achieve long term, sustainable business growth. If you are dealing with any of the issues I’ve written about above and would like to discuss, please call my colleague, Yvette Burtenshaw on 02 9542 2000.

Stuart Duncan is a Senior Sales Consultant at Micronet Systems, and is focused on helping business leaders overcome inefficient processes regarding: sales, inventory and accounting systems by leveraging cutting edge technology. If you want to gain better control of the sales processes in your business, then leverage Stuart’s knowledge, with over 35 years of experience.