How to Avoid Organizational Growing Pains
By Ray Silverstein
When it comes to growing a business, is it possible to experience too much of a good thing? Yes, it is. And while you might think this would be a good problem to have, think again. Many times this can put you out of business.
Too-rapid growth is actually more dangerous to a business than no growth at all. While we tend to envy ‘overnight successes,’ research shows that growth exceeding 25% per year puts a business at risk of failure.
Just consider all the demands that an unexpected growth spurt would place on the various facets of your business:
Financial – Suddenly, you have big orders to fill, but not enough inventory to do so (or people-power if you’re in a service industry). Nor do you have the cash on hand to purchase what you need (or to hire who you need). Plus, getting credit is trickier these days (especially for service businesses that don’t have hard assets to offer as collateral). Purchase order financing is a possibility, but it is almost impossible to obtain and very expensive.
Personnel – Regardless of what you sell, you’ll need more workers to push your products or services out the door. But you don’t yet have the dollars needed to meet a rapidly-expanding payroll, not to mention the acquisition costs of bringing on new employees. Speaking of which, you’ll be so busy, you won’t have the time to make wise hires or train your newbies properly.
Morale – Because you’re short-staffed, your employees are constantly under the gun. Even dedicated workers can only give so much for so long before they start to burn out.
Workflow – If you don’t have adequate technology and processes in place when business explodes, what you do have will short circuit your ability to service or produce. Now you have a new fire to put out, and even less will get done.
The end result is: orders will go unfilled, and service will suffer. Customers will lose patience and walk. And remember, business that’s lost due to service issues is very hard to win back.
Picture a tiny, start-up restaurant that unexpectedly receives a great review from a trendy food critic. Suddenly, it needs five or six servers to wait on the nightly crowds, but it only has four on staff. Service plummets; waiting time skyrockets…and unless management makes some quick fixes, soon it will only need three.
Manage Potential Growing Pains
You may think this will never happen to your business, but it may be sneaking up on you, on a smaller scale. My point: keep a pulse on your activity and plan ahead. Know Thy Business. Build on your strengths, shore up your weaknesses, and attend to these key areas now:
Financial – Lay the groundwork for acquiring credit in advance. Develop a relationship with your banker. Build a good credit history. Study your numbers and get them to a healthy place.
Personnel – Always know who your next hires may be. Think of your workforce as a major/minor league system. If you’re continuously scouting for talent, you’ll be halfway there when it’s time to hire. Your minor league is a list of people you believe have the right attitude and skills to do the necessary work.
Morale – Nurture it always. Build good communication habits with your employees. And remember, a little personal appreciation goes a long way.
Workflow – No one wants to incur the expenses of upgrades until they’re absolutely needed. But every new system has learning curves to master and bugs to work out, so who can afford to wait until crunch time arrives?
Finally, learn to recognize the symptoms of growing pains. An easy way to get started: use my Growing Pains Diagnostic Test to conduct a DIY five-minute checkup. Just email Ray@propres.com and request a copy. Do something easy and healthy for your business today.
About the Author: Ray Silverstein is President of PRO, President’s Resource Organization, a network of entrepreneurial peer advisory groups in Phoenix and Chicago.