Over the years, I have worked with many business owners through their rapid growth phase. Now, what I mean when I say rapid growth is going from a couple of employees to 20 employees. For a small business owner, this growth represents a major learning curve.
During this growth, I see many owners make the same mistakes or stumble in the same area. With this in mind, I thought I would share some issues to watch out for if you are in a growth mode or hope to be growing soon.
Learn to Delegate
I think the inability to delegate keeps many business owners from growing at all. If you want to expand, then you must learn the art of delegation. If your employees can not learn to do what you do, then you either have poor systems, poor training or just hired the wrong people. Whatever the case, you must correct the problem and be able to delegate work if you are going to truly grow your company.
Have a Good Accounting System
It is hard to make good decisions with bad or no information. One of the most important systems in any business is the accounting system. When small businesses owner’s first start the business, it’s easier to overcome poor accounting because you might be the only one handling the money and writing the checks. As the business grows, it is critical that you are collecting the relevant information so that you have access to correct and timely financial information. Also, as you grow, you need to have audit controls in place to insure that the company assets are not mismanaged or stolen.
Sales versus Profits
In a growing business it is easy to get giddy about the ever increasing sales numbers. However, a word of caution, you need to focus not only on the sales but on the profits. It is not how much you bring in the door but how much you get to keep.
Profits versus Cash Flow
It’s hard to believe that you can grow yourself out of business. This happens often with fast growing businesses. You can be profitable but broke at the same time. Understanding the cash requirements of your business and its sustainable growth rate is must for owners of rapidly growing businesses.
Match Financing with Asset Life
One way that business owners run out of cash is that they often take cash out of the business to buy long term assets. Just because you have cash doesn’t mean you should use it to by much needed equipment. It might be better to obtain an equipment loan that matches the life of the equipment such as a five or seven year loan depending on the equipment. This will keep valuable working capital to support inventory growth or accounts receivable as your sales continue to grow.
When your business is booming it is easy to get so wrapped up in it that you fail to take care of other matters. I’m not talking about squeezing more business hours in the day. It’s about life balance. Making time to take care of your health, spend time with family, and nurture your spirit. Studies have shown that the more “balanced” you are the more effective at work you are. So make time to do important things in other areas of your life.
Lynn Vos is Area Director of The University of Georgia’s Small Business Development Center. You may contact her at 912-651-3200.