Learn how to manage the financial strain that comes with growing pains and help your business thrive.
As a business owner, you probably dream about a thriving business. One where clients are banging down the doors and vying for your services. The problem is that such rapid business growth isn’t always as delightful as it sounds.
Your business has to assess a whole set of new challenges while determining whether this is a glut or a sustainable pattern, and also delivering on workload not seen before. While these challenges can be stressful, there’s opportunity that comes along with them. Manage them well and your business can scale to the levels you’ve dreamed of.
Here are 6 tips to help you manage rapid business growth.
Table of Contents
1. Understand Where Business Growth Is Coming From
When you have your first surge of business growth, you’ll probably spend a minute to stop and congratulate yourself. All of the hard work you put in is finally paying off and your business is on a massive upswing.
Once you’ve given yourself a well-deserved pat on the back, it’s time to examine where this growth is coming from. First, is this sustainable growth? There’s a difference between a one-time surge (say, from a big one-off project) or sustainable momentum. If it’s the latter, you need to do some additional digging.
If it’s sustainable growth and not a one-time blip, what is causing it? Can you continue to fuel the part of your business that is driving the growth?
For example, a great marketing campaign may be driving sales. Or it could be that your business is significantly better than the competition in a certain area. Whatever the cause is, it’s important to identify so you can lean into it and continue the upward trajectory.
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2. Create Your Growth Plan
If you created a business plan previously, it’s likely out of date by now because you didn’t anticipate the rapid growth your business is currently experiencing. Some things to consider as you start putting together your new plan include:
- Do you need to expand your team? If this growth is sustained, you may need more employees or freelancers to help you manage the additional workload.
- Can you provide customer support? Doing the work is one thing, but when you have more customers, you may need to invest in additional customer support. That could mean investing in an outside service to handle customer support needs.
- Do you need a larger space? With more employees, you might need to have a larger office. That additional cost needs to be factored into your estimates.
- Do you need to say goodbye to some clients? You may have current clients that are either low paying, slow to pay, or hiring you for services that you no longer want to provide. Letting go of clients that no longer fit your growth plan may be the right move.
Once you’ve considered these questions, put together a plan to take your business from where it is today to a business that can handle the new scale this growth is bringing you.
3. Crunch the Numbers for Working Capital Needs
Many businesses wrongly assume that if sales are increasing, profits will be too. But that’s not always the case—there may be situations where profit margins are lower.
Before you start spending money hiring new people or investing in a bigger office space, take a minute to understand your finances beyond just the top-line revenue number. Analyze current sales, overhead, inventory, assets, liabilities, and your operating costs to understand the health of your business. These numbers will help you make future projections so that you can determine how much working capital you need.
Working capital is used to fund your day-to-day operations like payroll, investment in equipment or tools that won’t provide returns until work is complete. It’s the money you have available for a rainy day, and you calculate it by subtracting current liabilities from current assets.
If you have more assets than liabilities, you have a positive working capital. If you have a deficit, however, you may have problems paying creditors.
As your operating costs, human capital costs, and infrastructure costs grow (thanks to your booming business), the more working capital you’ll need to finance that growth. Take some time to estimate how these three costs will increase over time—and how much working capital you’ll need to finance that growth.
4. Streamline and Simplify Processes
As a business grows, you may find that your workload and the workload of your employees starts increasing to an unsustainable level. Before rushing out to hire more people, it’s a good idea to take a step back, and see what you can improve operationally by streamlining and simplifying processes.
Start by eliminating tasks that don’t need to be done. As you grow, you’ll find that there might be tasks that are either no longer needed or were inefficient to begin with. Eliminate what you can, without sacrificing quality.
Once you’ve eliminated anything redundant, see if there is anything you can do to combine employee tasks or reorganize functions to make them more efficient. Once you go through this process, it will be easier to see who you need to hire and what their exact responsibilities will be.
One function that is easy to streamline is your accounting. Manual accounting and report creation can work for a short period of time when your business is small, but it’s not ideal. As you grow, getting solid accounting systems in place can help you make clever decisions about your business, quickly. FreshBooks offers accounting software that can grow with your business, making it a smart option for businesses that are experiencing growth.
5. Hire Carefully
Adding extra headcount to your payroll before you can afford it, or have the business to sustain it, can be a huge weight on a growing business. You may want to consider hiring contractors or freelancers while you get an idea of exactly what your staffing needs are. Just be sure that you’re staying compliant with employment laws, and not treating your contractors or freelancers like employees.
6. Build Your Network
Having a network of mentors and other peer business owners to talk to can help as your business scales. You can ask for advice and talk about what has and hasn’t worked in your respective businesses. There’s a lot you can learn from others to help you avoid wasting hours or making expensive mistakes—you don’t have to go it alone when scaling your business.
If you don’t have an active network of business owners you can talk to, start building one. Reach out to other businesses in the area, attend meetups and actively work to make connections. Forming mutually beneficial relationships will go a long way in helping your business in the long run.
Business growth can be a great thing if you’re prepared for it. It’s exciting and it’s what you dreamed of when you started your business. There are challenges that come along with rapid business growth, but work through these steps intentionally and you’ll put yourself in a great position to handle your business as it booms.
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This post was updated in September 2020.