Growth is what most business owners work hard to achieve. Growth can add value to a business, creating more jobs and wealth for business owners, shareholders, lenders and other stakeholders.

However, growing too quickly can cause as many problems as growing too slowly. Growing too quickly has caused numerous small businesses to collapse under the weight of success.

Five Ways to Grow a Business

There are lots of ways to grow a business, whether it’s a start-up working out of a spare room, or a global enterprise working out of a board room. But each has risks as well as benefits.

  • Adding new products offers consumers more options and can lead to increased sales. However, would you have the equipment, suppliers and manpower to quickly handle a 500% increase in demand for your products?
  • Eliminating under-performing goods or services can enable management to focus on the offerings that bring in the most revenue to the bottom line in the most cost-effective manner. More efficient, productive equipment may be needed to streamline systems, but that often requires a large capital outlay.
  • Offering more services can expand your target market, requiring additional marketing and more professional staff to oversee the highest quality of service delivery. Could you afford to hire a middle-tier management team to oversee market expansion?
  • Adding remote site offices grows your service area, and may require a new distribution system – quickly. Expanding a service region may require new personnel, new workspace, new equipment and new interaction between the home office and remote site locations.
  • Purchasing tangible assets – equipment, warehouse and manufacturing space, a larger office – can grow a business quickly, though finding access to expansion capital when it’s most needed can be difficult.

Managing Business Growing Pains

Problems with too much growth, too quickly, can occur at any time during the life span of a business – from Day One.

Business growth should be constant, but gradual, to enable company management to pay for business growth from the proceeds of sales – the revenues currently generated by the business. This approach delivers the greatest flexibility because financing remains in-house.

One of the biggest problems with business hyper-growth is the ability of business owners to secure expansion capital. Traditional lenders, which offer commercial lines of credit*, can be excellent sources for established companies with a long history of profitability.

Avoiding the Pain of Business Growth

The keys to avoiding company growing pains are realistic planninganticipation and orderly preparation for the consequences of fast business growth.

Realistic Planning

If you plan to open a second or third retail outlet, your planning might include researching the cost of renting space, the expense of new employees, inventory delivery and tracking, additional marketing expenses and other factors that you face daily in current operations.

These growing pains aren’t necessarily new problems, but they may require new solutions, which you can plan well in advance of your intended expansion. Give yourself time to plan for an orderly expansion that you can manage without adding stress to your already successful business.

Anticipation

Based on your detailed plans, you can make educated estimates that anticipate the results of business growth and how that growth will be accomplished. Using current data from daily operations, it is fairly straightforward to extrapolate the facts and figures associated with your planned business growth.

Your assumptions, at this stage, should be based on both the best and worst-case scenarios. Chances are, your business reality will fall somewhere between the best and worst outcomes. Use current data to create realistic expectations and anticipate the needs required to meet those expectations, both in-house and with your client or customer base.

Orderly Preparation

If you plan ahead and accurately anticipate the outcomes of your plans, you greatly simplify the orderly preparation that can increase the likelihood of business growth and ultimate success.

Avoid growing too quickly – so quickly that you’re left with few options to grow smartly. Plan, anticipate and prepare for success to increase your chances of reaching your company’s growth goals.

* Subject to credit approval. Terms and conditions apply. See a banker for details.

 

 

The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of Zions Bancorporation, N.A. Member FDIC