Login
iscover
It’s essential to put in place a few basics before your business scales up, because getting it wrong can be fatal.
Newsletter
How to take the sting out of growth pains
17 November 2022
•
13 minute read
You’re out of free articles for this month
To continue reading the rest of this article, please log in.
Create free account to get unlimited news articles and more!
If you run a business then you need to be aware that while growth is desirable it can also be painful, and that pain can even kill a business if it’s not properly managed.
This is how to ensure that rapid growth stays a good thing for your company and doesn’t consume it. There are some basic steps to take if you want to get things right during your growth phase.
Good systems
Nothing will beat having the right systems in place to support growth. Scaling is simpler when you have a platform in the background that grows with you.
This means for the main aspects of your business you should examine each critical system before you scale and ask, “How can this help us grow?”
An audit of the technical side of your business can prevent a ton of pain, rather than finding out when you are suddenly flooded with new orders or work and realise that your “slightly cumbersome” customer management system is “too cumbersome to manage” at scale, for example.
==
==
Good people
It’s also important not to neglect the human side of your business. It’s better to scale with an experienced team that has a thorough understanding of your products and/or services, and how they are delivered to your clients in a way that delights them.
All too often you find businesses trying to pull off explosive growth with teams that have barely formed or in which conflict bubbles under the surface all the time. The pressure caused by rapid growth then turns this into almost open warfare.
You need to pay close attention to the people side of things and realise that company growth can be challenging for some folks. You may need to offer support, development, training and coaching to get people ready for the “big push”.
Good accounting system
This may be the most important part of all. The thing that is most likely to cause pain or even death of a company during a growth phase is lack of cash flow.
Cash flow is the lifeblood of your business. If you don’t have enough cash in the bank to meet your obligations when they come due, you will be insolvent and risk losing everything you have worked hard for.
It is possible to make $5 million in sales and have no cash flow. This will result from you spending money before you collect it from your new customers.
The basics of a good accounting system are:
- Contracting — are your contracts for supplying services and/or products compatible with your growth ambitions? When do you start working on any given order? When do you get paid for that work? What do you need to lay out before you can get paid?
- Invoicing — you also need a system that allows you to accurately invoice each customer as soon as the appropriate time in the customer life cycle is reached.
- Cash collection — sending invoices is one thing, making sure they are paid in a timely fashion and the money is in the bank is another. You need a process for pursuing money and protecting your investments in work, time, materials, and so on.
- Keep accounting records up to date — knowing your numbers is vital, and the only way to do this is to have up-to-date accounting records, which reflect not only your cash transactions, but also what you are owed and owe, to better manage cash flow. Understanding how your growth impacts your profitability is also essential. There is no point in expanding operations if profitability doesn’t also increase.
You also need to ensure that these individual elements can scale with you as you grow. It’s easy for invoicing to become overwhelming, for example, if you have been relying on the company salesperson to handle it by themselves when the business was smaller.
Final thoughts
It can be tempting to try and do some of these things “on a shoestring budget” in the early days. While cost savings are desirable, you don’t want to get too cheap or that can bring a whole additional level of pain.
Instead, if you focus on good systems, good people, and most of all a good accounting system, you’ll be ready for the success that you seek.
Sonia Gibson is founder of Accounting Heart.
You are not authorised to post comments.
Comments will undergo moderation before they get published.