4 Strategies for Companies manage unexpectedly fast growth

Fast success does not come without plenty of potential issues

Super-fast growth requires business owners to be extra careful, or they can bankrupt their startup by mismanaging cash flow; by being inefficient; and by not keeping up with ever-increasing costs and overhead. Some entrepreneurs sacrifice profitability, deliver subpar products and services, cut back on 24/7 customer support, or can’t build an infrastructure fast enough to keep up with demand.

There are other risks. Inability to collect receivables or losing a big client reflect the many risks of scaling. Unlike global companies, a startup’s revenue stream is concentrated. Other operational risks reside in a few failure points, especially those that significantly affect cash flow.

Half of small businesses fail after 5 years, according to Bureau of Labor Statistics. Family and friends of an entrepreneur often think that only slow sales threatens a startup’s existence. But so too does scaling operations too quickly. A founder often won’t have enough cash to buy larger inventory levels, or may not have the skills to forecast cash requirements for the next few months. Debt might also run amok. Yet, creditors and bill collectors are always demanding to get paid.

Here are 4 Strategies for Companies must do to manage unexpectedly fast growth.

Scale Talent and Build Infrastructure

Extreme growth makes hiring talent a critical success factor. A founder gets overwhelmed at day-to-day tasks, and he/she must quickly hire new managers and employees who cover his weaknesses and bring skills needed to run a larger organization. An expanding venture must also remain operationally efficient to prevent bloated costs and keep cash flow ahead of the curve. It can feel like constantly swimming to keep your head above water while a turbulent tide rises fast.

Major issues in inventory management, customer support or working capital (like collecting receivables) could bankrupt a firm. A growth business needs more cash flow to keep up with ever-increasing expenses. Thus, a finance manager or CPA must forecast cash flow, and also keep an eye on profitability. A scaling venture that sacrifices profitability can risk going under without financing from the founder, investor or a bank (through a line of credit).

Read more: https://www.inc.com/kenny-kline/4-strategies-for-companies-facing-quick-growth.html?icid=landermore