Tips on managing business growth

on November 22, 2005

As an entreprenuer, the most attractive word in our vocabulary is growth. We want high growth because in our minds, that denotes a successful business. It makes perfect sense – if you were unsuccessful you definitely wouldn’t grow… so the opposite must be true!

Unfortunately, many entreprenuers have learned the hard way that growth is a two edge sword. If you initiate a growth phase, it’s typically because you are doing something right. You effectively execute sales, you deliver your services, and you parlay those successes into more growth. But what happens if the middle link of that chain weakens (or even breaks)? Growth kills your business…

Inevitably, a small growing firm reaches its capacity limit at some point in their growth process. They either run out of human power, business resources, or capacity to manage operational issues. Once they reach capacity, every entprenuer has a tough decision – do they believe that this is a true growth phase… or is this merely a spike in work?

If the entreprenuer incorrectly hires, they hurts the business by having excess capacity sitting on the bench and not generating a needed ROI. If the entprenuer incorrectly rides the storm, the firm suffers by having stressed employees, lower quality, and even a damaged reputation. This tricky balance is what makes the ‘G-Word’ a very difficult process to manage – especially as a small business.

Here are some great tips for managing business growth from

* Establish credit lines that grow
Whenever possible, try to establish credit lines that will grow along with the business. For example, in setting up a credit line with your bank, try to get a credit line based on a percentage of your receivables, rather than a constant, static amount. Chances are your credit line will be reviewed by your bank annually and will be subject to ceilings and restrictions, but try to build as much flexibility into your borrowing relationships as you can. This will leave you better equipped to finance fast growth. Also try to establish credit lines with your trade suppliers that grow along with your business as well.

* Add systems and procedures
As your business grows, you won’t be able to spend as much time personally checking over details as you did initially. So, set up systems and procedures that will help you be sure that management and staff are continually making checks in the same manner you would have. Maybe, for example, you need to set specific product quality control standards. Or maybe you need to set up purchasing procedures. The more your day-to-day business operations rely on systems and procedures, the more growth you will be able to effectively achieve.

* Watch nonfinancial limits
Because money, or rather the lack of it, is such an overwhelming impediment to growth, it is easy to overlook other issues that may limit your ability to grow. You might feel that some people on your staff, your computer system, your facilities, or some other component of your business is being overtaxed by continuous growth. If so, don’t hesitate to slow down the pace of growth for a while until you feel that that component of your operations is running smoothly again. It takes a wise, disciplined manager to hold back on unbridled growth to ensure that the company can continue to deliver quality products in a professional manner.

* Use ROI criteria to determine which investments to pursue

Because a fast-growing business often has more profitable options to pursue than it has money, a decision must be made as to which options should be pursued. One way to determine which options offer the best opportunities for success is to select those with the highest return on investment (ROI). A simplified example is that of a store trying to decide which of two different product lines with equal profit margins to carry. Using ROI criteria, the store may decide to carry the product line that sells faster because its money or investment will be tied up for a shorter period of time, giving a higher return on the investment.

There are many, many strategies to managing growth. The most valuable advice is for you to actually sit down and analyze your business. Determine your growth, how it is affecting you, and what steps you need to take to cope.

Here are more great resources:
NFIB – Managing Growth
Business Journal – Manage Growth
SCORE – 60 Second Guide to Managing Growth

Lastly, I also found a great article about seeking a board of directors to assist in managing your growth. This isn’t a novel idea – just a novel idea for small entreprenuers. We feel like we are kings of our domains, so it’s difficult for us to consider seeking advice from a panel of peers. Nonetheless, check out the article:

Tips on Establishing a Board of Directors