How to Identify and Avoid Organizational Growing Pains in Your Small Business
Growing a business is exciting, but can you grow too fast? Absolutely. While rapid growth might sound like the ultimate success, it can be more harmful than helpful. In fact, research shows that businesses growing over 25% annually are at a higher risk of failure.
The following are critical factors every small business owner should consider when managing growth to avoid common pitfalls:
1. Financial Challenges
Rapid growth can stretch your finances thin. You might have large orders to fill but lack the inventory or cash flow to meet those demands. For service-based businesses, securing credit is even more difficult due to a lack of hard assets.
Tip: Establish a relationship with a banker early and build a strong credit history. Being prepared with accessible credit is key to navigating sudden growth smoothly.
2. Personnel Strain
Whether you sell products or services, more sales mean you’ll need more people. However, the costs of hiring, training, and expanding payroll can quickly overwhelm you, especially if you’re unprepared.
Tip: Always keep an eye on potential hires. Think of your workforce as a system with major and minor leagues. Continuously scout for talent so that when the time comes, you’re already halfway through the hiring process.
3. Declining Employee Morale
Growth means your current employees will likely need to take on extra workloads, leading to burnout. No matter how dedicated they are, there’s a limit to what they can handle before it starts affecting morale.
Tip: Regularly check in with your employees, foster open communication, and show appreciation. Simple gestures of acknowledgment go a long way in maintaining a positive work environment during stressful periods.
4. Workflow Bottlenecks
Without adequate technology and processes, rapid growth can cause your workflow to short-circuit. When you’re overwhelmed with new business, even minor inefficiencies can lead to significant delays.
Tip: Plan for technological upgrades before you’re in a crunch. Waiting too long can lead to costly disruptions. It’s better to onboard new systems during stable periods to avoid last-minute chaos.
A Real-World Example of Growing Pains
Consider a small restaurant that gets a glowing review from a top food critic. Overnight, they go from needing four servers to needing six. However, with only four on staff, service quality plummets, waiting times increase, and customer satisfaction suffers. If they don’t quickly fix the situation, they’ll soon need even fewer servers because customers won’t come back.
This story illustrates that unplanned growth can backfire without proper preparation. So, how can you manage potential growing pains before they occur?
Managing and Planning for Growth
Whether or not your business is facing rapid growth now, it’s essential to always plan ahead. Here’s how:
- Financial Readiness: Get your numbers in a healthy place and secure credit before you need it.
- Talent Pipeline: Have a system in place to scout and identify potential hires before the need arises.
- Morale Management: Build a strong company culture where employees feel valued and appreciated.
- Upgrade Workflows: Don’t wait until you’re swamped to upgrade systems. Addressing these issues early will keep operations running smoothly.
Is Your Business Suffering from Growing Pains?
Now that you’re aware of the potential risks, take some time to reflect on your business. Do you have the right systems, people, and processes in place to handle growth? Being proactive in addressing these issues can save your small business from the dangers of rapid expansion.
Growth should be a goal, but only if managed wisely. By planning ahead, you can avoid the pitfalls of rapid growth and position your business for long-term success.
You can find more information on growing your small business in “A Small Business Toolbook” by Ray Silverstein, complete with worksheets and business outlines. If you want a FREE copy of this workbook send an email to Ray at ray@propres.com
