What's your primary goal in 2023? If you are like most small business owners, you want your company to grow and make more profit. Now, what if you are constantly growing year after year? Great! It means you have a fantastic product that is in demand.
But while growth is generally good, too much growth, too rapidly is a dangerous sign for small business owners.
Why? Because most small business owners do not know how to properly manage explosive growth. Everything starts to careen out of control. Clients leave, employees are unhappy, deadlines are missed, etc. This problem is termed the "hidden dangers" of very rapid growth. In other words, the pace at which your company grows plays an essential part in your company's survival.
A study by Professor Cyrus Ramezani examined more than 2,000 companies, examining how they grew. Ramezani discovered that companies with the fastest revenue growth (average annual sales growth of 167%) performed worse in revenue and profit than their slower-growing counterparts, whose growth averaged 26%.
But what are the actual odds that your company will crash and burn? The Kauffman Foundation and Inc. Magazine conducted a recent study of 5,000 businesses that grew rapidly. The findings revealed that 2 out of 3 companies on the list had gotten smaller or were out of business entirely.
When a small business has not successfully developed the infrastructure or management systems it needs to scale successfully, it begins to exhibit some significant problems that will have dire consequences. These problems indicate that something has gone very wrong in the organizational development process and are an "early warning sign" of significant future problems. The bottom line is that the company has not implemented the correct foundational structure to sustain rapid growth.
10 Signs of Rapid Growth in a Small Business
- Not enough hours in the day.
- Spending too much time "putting out fires."
- Not aware of what others are doing.
- Owner not delegating.
- No scheduled meetings
- Increased customer complaints
- Increased HR problems
- Cash flow difficulties
- High levels of employee stress
- Low morale
- Growth in sales, but not in profits.
Rapid growth will significantly impact your ability to execute as a business owner. As you try to lead and manage, your product or services will begin to falter as your work processes come under pressure from increasing demand.
Growing too quickly could make you lose focus on essential functions and take on too many tasks, delivering below-par outcomes that lead to frustration within your company and disappointment for your clients. The problem escalates when internal business systems and procedures are not in place or mishandled due to everyone being overworked. Inadequate control over budgeting, inventory management, marketing, and sales programs could derail your success as a business.
Outsourcing some functions is a viable method to delegate some non-critical administrative functions. Depending on your needs, this arrangement can be transitional or permanent, but it's essential to scale your processes to align with your growing business.
No one is an expert in everything, so this may be the phase where you bring in an outside business coach to help you gain control of your company and teach you how to pace your growth.
According to data from the Bureau of Labor Statistics, about 50% of new businesses survive the first 5years. And by the end of the decade, only 30% will remain — that’s a 70% failure rate within the first 10 years.
If your company is taking on too much work and you are finding that more and more of these problems are present, SLOW DOWN and gain back control. Your company's future is riding on it.