July 18, 2013
Growing your business is a good thing, right?
It can be, but growing a business too quickly can be fraught with complications. As with most challenges facing businesses, some planning and preparation can help minimize the issues.
Think about what “growing your business” might entail:
- Adding new products
- Bringing on new suppliers
- Engaging new customers
- Hiring new employees
Every time you see the word “new,” translate that into “change and disruption.”
What happens when you bring on something new? You have to integrate it into the current system. New employees have to be trained. New customers have to be set up, serviced, and so on.
Taken one or two at a time, these tasks are part of running a business. But change too many things at once, and chaos may ensue.
An all-too-common problem is a company that adds numerous new customers without adding sufficient customer service support. New customers often need extra support in the beginning as they learn your processes and get their systems to work with yours. That puts an extra load on customer service.
New customers won’t remain customers for long if they can’t get what they need. Existing customers will flee if they feel they no longer get the service they are used to. If you’re not ready for it, growth of your customer base could turn into customer departures.
If an influx of customers is expected because of a new territory, a merger or the addition of sales resources, prepare your customer service area for the changes. It may be helpful to bring on temporary staff to help with the transition.
Start that process early enough to train new team members before the rush hits. Perhaps customer service processes or systems will need to be beefed up. Take this as an opportunity to engage your customer service team to look for ways to service customers more efficiently. Then use the efficiency gained to allow you to service more customers.
Another common problem occurs when a company adds too many new employees at once. This often happens because growth has stretched existing employees to their limits before new resources are added.
Training the new employees adds to the stress, which can result in inadequate training, errors and customer issues.
Think through what will happen when new employees come on board. Design an orientation and training program that integrates the new staff, and try to time your hiring so that integration takes place before the workload reaches the breaking point. That’s not always easy to do, but it will pay off if you can time it more effectively. What if you add new products to your lineup? That can mean more revenue, right?
Yes, but it can also result in the need to educate your sales team and customer service associates to support the product, become familiar with a new distribution channel, and learn to manage the new inventory.
These aren’t necessarily bad in themselves, but doing too many of them at once can overload your systems. Just be aware of all the processes in your system that will need to be involved when you take on the new opportunity.
Sometimes, growth happens so fast that current systems can no longer handle the load. That can mean the need to update equipment, processes, technology and so on. Once again, this means more change that will have to be absorbed by the team, and more money to be expended by the business. Speaking of money, cash requirements can cripple a business in the midst of rapid growth. There is often a lag between adding new opportunities and reaping the financial benefits.
In the meantime, bills have to be paid, equipment has to be purchased and new employees have to be hired. It is important to have financial tools like cash reserves or a line of credit available to help get you through the growth curve.
As shown in the diagram, growth seldom takes the straight-line path. There are usually setbacks to be overcome before the next rise can take effect. Managing through those valleys is the key to making the growth successful over time.
Most business owners get excited about growth, and for good reason. Rarely does a business sit still – either you grow or you decline.
But, don’t get so excited about growing that you fail to plan for the successful absorption of the new business. Recognize the challenges that will come as a result, and develop plans to address them. Then your growth can be a positive experience!
This article was originally posted on July 18, 2013 and the information may no longer be current. For questions, please contact GRF CPAs & Advisors at email@example.com.