Inc. Magazine completed a follow-up study eight years after they first published their ‘5000 Fastest Growing Companies List’ – and the result? A shocking two-thirds of companies on the list had shrunk, ceased trading or been sold disadvantageously. The main reason for this was their failure to mature and prepare for their high-growth period. As CFPro Ventures, and even in our previously lives before CFPro Ventures, we have had the pleasure to work with many high-growth businesses – and by the time the businesses come to us for help, they’re keen, eager and ready to take the next step forward. And whilst a positive attitude and a willingness to progress is fundamental – sometimes, some business simply aren’t ready for the next step up and what that means.
We explore how being unprepared for growth can be detrimental to your business, and, more importantly, how we can give you the right business support to be growth-ready!
How can growing too quickly kill your business?
Whilst the high-growth of your business is a great source of validation in your products and services, it is a common misconception to believe that your business will continue to grow successfully at the same pace with no pre-planning.
A great control and understanding of your finances is a necessity in smaller business, and you should be confidently keeping track of your expenses and sales. However, when you reach a certain level of growth, you may find it harder to keep track of all your margins in the same way. It is important to work with a company who will be able to assist in your financial management whilst you focus on the development of your business.
Cash flow changes are a key issue in high-growth businesses, as the rapid changes can come as a shock to those who aren’t prepared. If / when your demand increases exponentially, your profits may begin to shrink as your outgoing cost to meet the demand eats into your cash flow. This can quickly develop into a spiral with extra spending leading to extra borrowing that ultimately could lead to bankruptcy. A bad sales month when you’re struggling to balance the books, can become a real headache, but a realistic plan for weathering any unfolding situation will allow you to handle these changes in a calm and confident manner!
Some things that may help:
- A back-up plan of collections from personal sources or a pre-approved credit sourced from your bank.
- A varied client base as you grow, if possible, as this will mean you are not at the mercy of a giant client. If you have the freedom to work and communicate with many smaller clients, taking on less work during a period of financial stress will become easier to manage.
- The illusion of freedom and ‘being your own boss’ may begin to disappear during this period, and you need to work harder than ever to make sure everything is ticking over. Job satisfaction could decrease and you may lose sight of what you love about your business, but it is vital to get the assistance necessary to help your pride and job thrive and create even higher growth.
- Your staff will feel the extra pressure too, working overtime for seemingly no direct gain. It is important to remind them of what they can achieve as part of the company and as a united team, and that there will be light at the end of the tunnel! The loss of valued employees and people who have been with you for a long time will impact on morale for everyone involved, and could end up with you being in a constant state of crisis management – another unwelcome distraction from everything else going on. Make sure your staff are feeling confident in what they are working towards, and that their increased work load now will pay off when the company has grown further.
How can you prepare your business?
Here are just a few reminders to help you prepare your business for a period of high-growth. They seem simple – and, for the most part, they are. But surprisingly, so many of these go unnoticed.
- Knowing where you want to go and how you want to compete
Have a solid, contingency-laden plan. In a period of positivity that also holds the capability in a fast-growing environment to quickly turn sour, it is invaluable to have a prepared plan of action to follow. This gives you one less thing to worry about when so many variables are being thrown at you, and will ultimately allow for increased stability within the office.
- Stay Secure
As with any business in a digital realm, you could be the target of further cyber attacks that could deal a fatal blow to your business in its most promising period. Your intellectual property and customer data remain the most important aspect of your business, so be sure to keep your systems even more secure during your period of high-growth.
- Assess Internal Capabilities
A level of pragmatism is necessary when assessing where you want your business to go. Don’t go too crazy and ride the wave of high-growth. Make sure you keep your aims firmly rooted in reality and deal with the growing opportunities and threats in front of you. Make sure you have capable and committed staff (as mentioned earlier!) as they are the people who make your business function and can help to deliver, or ruin, any chance of success.
We’ve kept this one for last – because if there’s anything we want you to remember from this article, is the power of the right support partner. If raising capital is part of your growth process, you have one chance to get it right. That’s why you, as a leader and as a business as a whole, needs to have confidence in knowing when you are ready for growth. CFPro Ventures and it’s founders, has a proven track record in providing second-to-none support for businesses in exactly the same position as where you are now. Choosing the right business support, for many, is a matter of life and death for some businesses, and CFPro Ventures will guide you and your business and get you ready for the right growth, at the right time.