Every small business owner likes speed. They want to rapidly add sales and people to create a large company to show they are successful. But this type of hyper growth can get many small businesses into trouble since they lack the money, the skills or the infrastructure to support it. As a result, they can eventually grow themselves right out of business.
The key is to manage these three components of growth. Here is how to do it:
Get more cash: Growing companies eat cash. Expenses always lag sales revenue and cash payments from customers. Increasing sales typically means more inventory which equates to bigger cash investments. It also means adding people expenses before they produce revenue. Accounts receivable also goes up as customers pay after the company is required to pay for their cost of sales vendors. To understand this equation, a cash flow statement is critical. Learn how the company’s cash varies with its growth. Produce a pro-forma cash flow statement to predict what it will be in the future as expenses and revenue grow. This is difficult to do, so ask for assistance from your accountant or another financial resource. There are many analytical tools that can also help. (source)
Hire skilled people. As the company grows, the small business owner will need more experienced people. Entry level employees that are trained will no longer learn fast enough. Higher skilled team members will cost more money to hire. As a result, invest in one critical hire at a time and make sure that they are successful before adding the next key person. Even experienced people will take time to become effective in their new job. This is important not only from a productivity aspect, but from a company cultural fit. Rapidly hiring of people will shift the company culture and the small business owner needs to ensure it goes in the desired direction.
Improve infrastructure. Fast growing companies need bigger and more sophisticated infrastructures because of the increased number of customers that are serviced. This could mean more office space, better operational software or additional support services like IT and HR. Fortunately, team members can now effectively work remotely which minimizes the need for additional office space. Software as a Service (SaaS) allows companies to easily ramp to use the most sophisticated applications. Freelancers are easy to identify for support other support services using sites like Odesk or Elance.
Remember that sales growth does not always mean success unless it is supported by more cash, better people, and an improved infrastructure.