Entrepreneurs thrive on growth. Growth brings challenges, variety, a sense of moving forward and usually increased net worth. In fact, if your company is not growing, it may be at risk. You may not be able to attract or retain quality managers and employees. The innovation of your company may stagnate. Competitors may move right past you. Your company may have to grow to survive.
So, if you have to grow to survive, why is it that growth is so often the killer of new companies? The answer lies in the management of that growth.
Stages of Growth
Effective management of growth must be a priority of all businesses throughout every stage of development. This process begins at the "existence" stage, when you are asking yourself, "Will enough people buy your products to keep the new venture alive?"
If you survive this stage, the next question will be how to finance growth beyond covering day-to-day expenses with sales. This is known as the "survival" stage. If you still find yourself making it, you may discover you're actually making enough profit to pay yourself a decent salary.
During this "early success," you might no longer be able to make all the decisions. Finally, if you reach the "high growth" stage, your ability to manage people will be the main concern. However, no matter what the stage, there are two essential tools that will help you manage your growth: 1) An "organizational structure" that meets the needs of your company as it grows, and 2) an effective "cash management" system.
During the early stages of existence, any given company probably had a few people involved with just about every job. It is not uncommon to find the "president" of a small firm acting as the "director of research" as well as the "head custodian." As the company grows, however, this arrangement becomes more and more difficult. As growth occurs, job responsibilities need to be better defined.
With increased specialization,you need to promote communication between the different positions and departments so that people do not develop tunnel vision. Many a company has been plagued by employees who believe that a company exists for the sake of the accounting department or the sales department. You need to encourage the different specialists to communicate with each other and you also need to be a cheerleader to remind everyone of where the whole ship is headed while trying not to squelch the entrepreneurial spirit that brought about the growth.
Cash and Financial Management
Along with an effective organizational structure, few things are as essential to the success of a growing enterprise as an effective cash management system. Up until now, it may have been easy enough to keep track of all those expenses in your head. However, with rapid (and not so rapid) growth, the areas of your head that were once reserved for financial issues seem to become overcrowded with other concerns.
A growing company usually has a cash-flow problem, even if it is profitable. Growing inventories, accounts receivable and equipment expenditures cause cash flow problems. To avoid this, you need an effective cash management system. Without such a system, it is common to forget how much was spent on that last phone bill or who that last purchase order came from. Without this information, you might find yourself out of control and without the funds to finance growth. Your new company will be very much like an accelerating train that is about to run off the track - which a common occurrence for growing businesses.
Life After Growth
Most companies pass through these trials and tribulations associated with growth.