Growth always requires cash. Why? Many business owners are seeing a rapid increase in the demand for their products and services. The additional revenue, while good, can be a mixed blessing because it cost money to ramp up production if you manufacture or ramping up people if you’re in a service business. The added revenue from increased sales can take time to catch up with the expenses you accrue.
What most business owners don’t plan for is the amount of cash that flows out before the cash from the increased revenue comes in. So, cash flow forecasting is critical to be sure you have adequate capital to fund it. That funding usually comes in the form of a line of credit.
If you have to manage inventory in your business, then it adds a layer of complexity. Because if you sell the inventory on credit, then you have to add the purchases for inventory on top of the expenses you accrue.
Growth always increases complexity. Generally, companies going through growth will have an increase in people, which means maintaining effective methods of communication with and between employees and management. The HR process from recruiting to hiring to training to retention has to be implemented and maintained.
Growth can also require establishing or improving best practices in company operational processes. Whether it’s establishing new processes or eliminating mistakes or redundancies in existing practices, management will be challenged to come up with any number of organizational elements that need to be revised or revisited.
Growth is more than dealing with the same problems just on a larger scale. It means understanding and adjusting to a whole new set of challenges. This can mean a much more sophisticated management team and potentially a whole new infrastructure of the business.
When you decide to grow, it’s important to be sure you have the capital needed to grow and understand that growth could present some unique circumstances that you haven’t experienced before primarily in the areas of people, process or execution in your business. When you don’t know what you don’t know seek help from your management team or a trusted advisor to deal effectively with these issues to keep the company moving forward.