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When Too Much Growth Becomes a Problem for Businesses


Can too much growth be bad for your business? If your business is quickly expanding, be mindful of these pointers to look out for to ensure positive growth.

Fast-paced growth is a dream for most small business owners and their backers. Just ask any highly-valued startup what venture capitalists liked about their story, and the most common answer is growth. It often matters less if the growth is profitable, as long as the business is amassing customers at breakneck speed.

But too much of anything can be a bad thing, including growth. It can be equally as dangerous as having no growth at all, if it means you can’t meet your orders or keep customers satisfied. Consider Uber, the ride-hailing startup, for a glaring example. Sure, it has millions of customers, but it hasn’t yet been able to turn a profit, to the dismay of its investors.

When it comes to growing a small business, slow and steady still wins the race, even in a fast-paced digital world. It may take you awhile to reach your business goals, but by managing growth, you’ll be able to build a company that will be around over the long haul. That’s critical given only about one-third of small businesses get past the ten-year mark.

When you're in the weeds of running a business, it’s often hard to determine if your growth is healthy or harmful. Here are five signs of trouble that could turn into a problem if left unchecked.

1. You Lose Track of Cash Flow

When a small business is growing at a fast clip, it can be hard to stay on top of cash flow. Before you know it, your expenses are exceeding operational capital, or there’s not enough cash flow to meet demand. Either way, it could put the business in a bad situation if and when the money stops coming in at a record pace.

To prevent that from happening, you need to be able to predict your cash flow needs throughout the year and to put on the brakes when necessary. It may be hard to turn down a huge order, but it might be necessary if you know you don’t have enough money to purchase the extra inventory or hire the needed staff. A good rule of thumb is to determine how much cash flow you’ll need in a 12-month period, taking into account demand ebbs and flows. If you do that on a rolling basis each year, it can diminish the chances of cash flow problems and give you a clearer picture of how much new business you can take on.

2. Hiring the Wrong People

One of the biggest challenges for small business owners is recruiting and retaining quality employees. That can be made worse when a business is growing at a fast clip. You don’t have the luxury of time to screen and interview several candidates. You need help and you need it now. But hiring out of desperation rarely works. If you take on more orders but don’t have the proper workforce to fill them, you’ll end up with unsatisfied customers.

To alleviate that risk, you can turn to a staffing company for help. You may pay more than if you conducted a search yourself, but you’ll save time screening potential candidates. If you DIY hiring, make sure to be clear in the job description, listing all the duties and skills required. The more specific the job ad, the easier it will be to weed out unqualified candidates. Engage in some vetting of your own as well. A quick check of the candidate’s social media accounts can clue you in if he or she will be a fit with your small business’s culture.

3. Operational Inefficiencies

Projections and operational plans go out the window when you’re taking on more work than you can handle. You could incorrectly calculate the cost to meet the increased demand and end up with profitless growth. When you’re experiencing heightened demand it’s easy for parts of the business to suffer as you focus on churning out your product or service—but you can't let that happen. If you start to see aspects of the business suffer, it's a big red flag that you're growing too quickly.

Increasingly, small businesses are turning to technology to help them manage growth. There is a bevy of apps and platforms to automate most aspects of a business, from payroll to customer service. Some of these digital services are free, while others require an investment.

4. Customer Service Suffers

Your business doesn't exist without your customers. A fast-growing business might be bringing on scores of new clients, but are they returning for more? If customer service suffers as you pursue new clients, you're apt to lose the customers who were with you in the beginning.

If you do pursue fast growth, make sure customer service remains top-notch to prevent anyone from jumping ship to a rival. If complaints start to come in, address them quickly before your reputation takes a hit that may be hard to recover from.

5. Getting Behind on Invoicing

Orders are coming in and services are pouring out, but are you getting paid? When a business is in fast-growth mode, invoicing can easily be neglected. Who has time to send out bills and follow up on them when they have orders to fill? Ignore invoicing for a couple of months and even a fast-growing company can face cash flow issues.

To ensure you get paid as you pursue growth, consider an automated invoicing system. It will send bills and reminders when they go unpaid. You can also make it easy for customers to pay you by accepting different payment methods.

Spurring fast-paced growth in your business can be tantalizing, but managing growth will ensure your business lasts. That means taking on only what you can handle, keeping tabs on your finances, hiring the right people and maintaining top-notch customer service. Check all those boxes and you’re on your way to building an enterprise that will be around long after those flash-in-the-pan startups are gone.

Read more here to learn ways to grow your small business enterprise.

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