Growth is good, right? Yes — but you can have too much of a good thing. When your business grows too fast, it can lead to burned-out employees, disgruntled customers, and frustrated supply chain partners. Here’s how to tell if your company is growing too fast and whether it might be time to hit the brakes.
[Read more: 6 Signs Your Company Is Ready to Expand]
You’re having cash flow problems
Cash flow is a big concern for new businesses. More than 80% of new businesses struggle with cash flow projections. And, unfortunately, cash flow issues can be severe enough to cause the business to shut down entirely.
Cash flow problems can present in a few ways. A backlog of outstanding invoices, for example, means your clients aren’t paying on time, leaving you with limited working capital to meet demand. On the other hand, if you’re late paying your vendors, that’s a definitive sign of cash flow issues. A messy accounting system that makes it hard to track sales, invoicing, and expenses in and out can also be a sign that you’re growing too fast.
As your business grows, make sure you’re keeping track of key metrics like burn rate, customer retention, and profit margin. Implement tools and processes to lay the groundwork for a strong accounting system so it’s easy to keep track of your accounts receivable and accounts payable.
You’re getting negative customer feedback
Customers usually aren’t shy about telling you when there’s a problem. They’ll either leave you feedback on a review site, or they’ll simply leave for a competitor.
“When you’re too busy to give your customers the service they deserve, they’ll notice,” wrote Freshbooks. “They’ll likely flee and tell other prospective customers. According to recent research, more than half of customers will ditch working with a company after one bad experience.”
Bad feedback or low customer loyalty are good indicators that your team is not able to provide an ideal customer experience. Dig into customer complaints to see where the issue is. Is your team stretched too thin to respond to questions on social media? Are returns taking too long to process? Understanding where the issue lies can help you better allocate resources to solve the problem.
Inadequate control over budgeting, inventory management, marketing, and sales programs could derail your success as a business.
Elizabeth Fels, ZenBusiness
Your employees are disengaged
If your employees are consistently showing up late to work, missing deadlines, or showing other signs of low morale, they could be overworked. Your company may be growing too fast for your team to keep up with the demands of managing inventory, serving customers, and performing at a high level.
When this happens, it’s worth taking the time to understand what the team needs to succeed. “It’s best to slow down, recognize what is going on, and then sit down with the teams to ask them how to get the ship back on the right path. They will give you the insight needed,” Alex Draper, Founder and CEO of DX Learning Solutions, told Forbes.
Possible solutions include hiring new team members, reorganizing your staffing plan, or bringing on seasonal support to help you through this busy time.
[Read more: How to Prevent Employee Burnout]
Products are always out of stock
Your products are flying off the shelves — that’s great! But, if you’re always out of stock of your central product offering, it can lead to frustrated customers looking elsewhere to get what they need.
The inability to keep up with customer demand could indicate there’s an issue with your supply chain. It could also be a sign of poor inventory management practices. Dive into your data to understand where the challenge lies. Are deliveries arriving late? Or are you simply not restocking soon enough to meet demand? You may need to change suppliers, change your order cycle, or diversify your supply chain to improve your operations.
You’re not able to lead effectively
At a certain stage, the business owner should be able to transition to a leadership role and delegate the day-to-day management of the business. When a business owner is still in the weeds of running the company, it can indicate that you’re growing too fast. Rapid growth can lead you, the founder, to lose your focus on essential functions and take on too much.
“Inadequate control over budgeting, inventory management, marketing, and sales programs could derail your success as a business,” warned ZenBusiness.
If you find yourself multitasking to the extreme and trying to do too much yourself, consider that you may be growing too fast. Bring on outsourced help to see your company through this high-growth period.
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Published September 06, 2022