No businessperson thinks that an increase in sales and huge demand for your products and services can be a dreadful thing. However, many a business has simply had to close down as they may have grown too fast. When demand outstrips supply and the business just can’t keep up, or available finances won’t support production to meet with increased demand leads to a vicious spiral of poor business decisions, and finally, business closure.
What happens if your business grows too fast?
There are a number of consequences of your business growing too fast without the appropriate direction and guidance. The worst-case scenario, as aforementioned, is actual business closure and in these severe cases, you would need advice from firms like mcalisterco.co.uk, who would then be able to guide you through the closedown or insolvency process. Below are some of the associated risks and changes that will occur if the business grows too fast. The main idea is to understand that business growth should be organic and at a pace that can be maintained and supported by the business financials.
Can lose track of your finances
When there’s too much money coming in too fast, it is easy to lose track. Unless your business has the systems in place to adjust and prepare to deal with massive increases in income over a fleeting period of time, financial mismanagement and fraud are more likely to occur.
Easily overstaff with the wrong people/bloating
As soon as growth becomes either too fast or too large, one of the simplest aspects of the business to be adversely affected is hiring and recruitment. Manpower is generally needed in all the business functions, and as such, the recruitment process is often shortcut/streamlined to get the required labour for increased production as soon as is possible.
Neglecting the customer in favour of sales
The excitement related to significant sales increases often results in a business neglecting their actual core purpose. Instead of focusing on the customer, they hunt down sales and are left with a fantastic-looking balance sheet (which is temporary) but no future prospects as the customer will feel such neglect and likely to then leave.
A decline in actual profits
Finding your businesses optimal operating revenues and production levels and sticking to these is a key skill. It is a common occurrence in businesses that grow too fast to produce more for a smaller profit margin. The additional costs associated with the increases in production to meet demand begin to outpace cash flow, resulting in a flawed business model, but there is still demand for your product or service; it just won’t make sense to make it anymore.
Every business owner, senior manager, and stakeholder wants their business to grow, and having it take off or expand rapidly may very well be their dream. The financial returns will definitely be worth it, but one needs to prepare and plan for business growth accordingly to ensure that the growth isn’t a double-edged sword that serves to destroy your business.
