Here are four tell-tale signs that your small business is growing too fast, too soon.
You finally have a steady stream of clients and your business is ramping up quickly. So why does this dream feel more like a nightmare? It’s what you worked so hard for; a full inbox of clients clamoring for your business, phones ringing off the hook…
But one day, that dream is starting to feel like a nightmare. That inbox of eager clients is now an overwhelming time-suck. Not to mention the increase in bookkeeping and other back-office admin tasks. With more clients, the volume of quotes, invoices and expenses have also increased.
All this rapid growth is exciting, but the processes you originally had in place are starting to break down. Remember that invoice-tracking system that worked for managing 10 outstanding invoices at once? Well, it is feeling much more clunky and cumbersome now that you have passed over 200 outstanding invoices.
We’ve compiled a list of signs that your business may not be growing as sustainably as you think, so you can recognize if you’re starting to spiral out of control.
1. Your Financials Are Starting to Get Very Complex
You have mastered the ins-and-outs of invoicing and your accounts receivables are growing exponentially. With this increase in profits, you should be jumping for joy. But, there is a catch-22:
More money = more problems.
Notorious B.I.G.’s famous lyrics also apply to small businesses: more money in brings more complexity. The higher your financials are, the more volume of work you have coming in, making it hard to keep track of sales, invoicing and expenses in and out.
You are entering dangerous territory if you forget to follow-up on missed payments or to add a large expense to an invoice. You could end up with inflated working capital, leaving you in a lurch when you realize you don’t have enough cash on hand to bankroll a new, large-scale project.
Not to mention the fact that your tax reporting could now be incorrect as well, which can lead to a hefty penalty if you don’t catch these mistakes during tax season.
Key takeaway: Recognize that your finances will become more convoluted as you grow. What worked for you in the past, may not work for you in the next stage of growth…
2. You’re Too Busy to Give Customers the Service They Deserve
Your services are considered so amazing that customers are crawling out of the woodwork to work with you. But what happens when you can’t answer your customers’ calls and emails in a timely fashion or meet their projects deadlines?
Truth be told, when your popularity is out of proportion with your capacity, you’re in a dangerous position of alienating great customers with poor customer service.
And those key customers may choose to look elsewhere for the level of customer service and experience that they were accustomed to receiving from you in the past. It only takes one bad customer experience to begin eroding your business’ reputation.
Key takeaway: If you’re too overwhelmed to provide great customer service then you will alienate great clients, new and existing.
3. You’re Feeling the Pressure to Buy Equipment and Hire Employees
With your business capacity out of control, you are realizing that you need to hire help now or buy better equipment to help you get the job done faster and more efficiently.
Expanding your team (and the assets to support them) is a natural part of any growing business. But proceed with caution if you have to make these kinds of decisions on the fly, without crucial inputs.
These kinds of rash, uninformed decisions can be very costly. For example, a new hire could be a cultural-mismatch and leave within the first 6 months. This is an incredible expense for a small business when you consider that it costs an average of $240,000 to bring on a new employee.
Or that shiny new piece of equipment that you purchased to get your through a busy period is now a very expensive monthly overhead cost. And you are really feeling that expense now that low season has started.
Without proper time to consider your long-term needs, it’s easy to make rash purchase decisions and ill-advised hires.
Key takeaway: Fast purchases and hires can lead to long-term financial stress on your books.
4. You’re Making Crucial Long-Term Decisions on the Fly
When you are trying to keep your head above water, it’s easy to be short-sighted. But as a small business owner, you need to think about long-term growth. This includes whether your processes and systems are up to snuff to grow with you, such as IT solutions, customer management systems (CMS) and equipment/software upgrades.
Some questions you need to ask yourself, include:
- Are your existing systems and solutions still efficient and can they handle your projected volume of work in the months/years to come?
- Are you putting out fires more than analyzing why/how they happened in the first place?
- Do you know what direction you want your business to grow next?
These long-term decisions require concentrated thought, research and execution because they have a lasting impact on your bottom line and the way your business operates – now and in the future.
Key takeaway: Know where you stand today by clearing your schedule to think critically about the future of your company.
Do these signs sound familiar? Are you feeling crushed under the weight of your growing small business? Are you worried that you haven’t thought about your long-term strategy because you are so focused on getting through the sheer volume of work coming your way?
If so, we have compiled a list of sustainable solutions to help you make sure your small business doesn’t spiral out of control.
Growing a small business has its own unique challenges. But given the right tools and advice, you can conquer small business growing pains.
This post is optimized from an article written by Heather Hudson in 2017 for the FreshBooks Blog.
about the author
Lisa is passionate about small business success, having managed funding programs for hundreds of start-ups and entrepreneurs while working with a Canadian startup accelerator. She is presently Content Marketing Manager at FreshBooks and in her spare time, can be found tending to her plant babies.