By Avi Bendetsky, Managing Director BAS & MORE Bookkeeping and Virtual CFO
Every business owner dreams to grow their business. You dream about it. I do, too. Otherwise, we wouldn’t be here.
However, dangers are lurking in such hopes. So… should you just forget about expanding? Never! But avoiding the common mistakes of rapid growth can save and scale your business time and again.
RISK 1: Not Watching Your Cash Flow
As your business expands, it’s easy for expenses to exceed revenue. If you then have a quiet time or a bad economic period it can do your business in.
Avoid bandwagons like “managing by objectives” or “team-based decision-making”. There’s nothing wrong with the basic premises of many “new business operations” but unfortunately, in our zeal for bigger and better, we tend to throw out what’s tried and true.
RISK 2: Not Maintaining High Standards of Leadership During the Time of Change
When you get committed to expanding your business, sometimes, important things like employee satisfaction, team building, and customer relations get neglected.
As your business grows, you can expect more revenue, and it’s tempting to go on a “spending spree.” Growth may require building capacity or hiring new staff or purchasing new equipment.
But proceed with caution and keep in mind that your customers and your employees don’t always adapt to change as quickly as you’d like. Be sensitive to their anxiety. Be reassuring that your business still values them.
Expansion may involve outsourcing and handing over some of the day-to-day operations to someone else. However, it’s essential to keep your finger on the pulse of your company.
Keep a keen eye on things your leadership role may need when you are expanding. As your company grows so, too, you need to be sensitive to lapses in your leadership skills.
Rome wasn’t built in a day. Anything worth doing should be done gradually and with a carefully crafted plan.
RISK 3: Not Keeping Track of Business Trends and Forgetting to Delegate
As a small business owner, it’s easier to be an all-rounder, but as the company grows, can you handle it on your own?
Remember, it’s not your job to make all the decisions 24/7. Take time to understand how your role may change as the company expands. As a CEO, you have to spend your time effectively, know how to plan, communicate clearly where the business is going, motivate and delegate.
For instance, ask yourself whether you have a solid plan for collecting accounts receivable. If you’re billing and not collecting quickly, it’s easy to find your business in a state of needing a debt collector.
That’s why, it’s vital to have a trusted bookkeeper to analyse your figures and ratios while you can focus on further development, client retention or upskilling staff.
Another pitfall is thinking that success is measured in increased sales. More sales don’t always mean higher profits; what matters more is how much money is left in your bank account at the end of the day.
So too, don’t rush to hire new staff. Introducing Key Performance Indicators, known as the KPIs, might help to upskill your existing staff and increase their productivity while saving your overheads by one more salary at least.
RISK 4: Not Staying on Top of Your Clients’ Mind
Bigger does not necessarily mean better or even more profitable. Don’t let the quality of your customer relations slump because of attention to rapid expansion. Even if you are out there winning over new clients, it is vital to keep your present, loyal customers happy.
As a leader, you need to do what Steve Jobs called “thinking differently”. Stay on top of mind of your existing clients, identify new customer niches and develop products winning against the competition.
You may have gotten into growing your business in an economic boom or upturn for your company, but you need to be prepared for a business downturn, too. We all know what happened to fibre optics companies and dot.com enterprises.
RISK 5: Putting Your Company on Cruise Control
Finally, when things seem to be progressing swimmingly, don’t rest on your laurels and put the company on cruise control. There is a tendency in businesses and organisations to take a breather, sit back, enjoy the success, and pat yourself on the back. Meanwhile, your competitors might develop a solution that will overtake the market.
There is always a need to consider what you should be doing to take your company to the next level. As a business owner, you need to have a growth mindset.
Yes, I know, I said: “Don’t get in a rush to grow.” However, this doesn’t mean that you shouldn’t challenge yourself and your employees to keep your enterprise fresh and responsive to your niche market. Anticipate the growing needs and interests of your clients.
A company that sits back smugly will be overtaken by one that is attuned to the changing wants and needs. It’s just a matter of time.
So, if you want to see your business reach new heights, be courageous to grow with it. Research the market, try new things, and invest in your team. With these tools, you can expand while avoiding the pitfalls that can cost you your business.
Forewarned is forearmed.
Read more about streamlining your business and avoiding business expansion risks in my e-book, Overcome Your Business Growth Anxiety in 7 Steps, here.