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Managing the Business Risks Associated With Rapid Growth

Most people would think that growth automatically signifies a prospering business — but the truth is that if you grow too fast too quickly and without the resources to sustain the additional business, it can spell disaster. The sad truth to this is that although the original business model could have proven to be incredibly successful and show a promising future, it won’t matter if a business over-expands. In fact, The New York Times cites out-of-control growth as one of the reasons small businesses fail. Read on to learn why out-of-control growth can signal demise for a company.

Not Enough Resources

When growth supersedes the resources you have available for your business, you may find that other aspects of your business will suffer. You may simply not have the technology or manpower available to provide the level of service or quality of product that you previously offered. As a result, sales will decline and your customers will become unhappy. It won’t take long before your reputation is ruined.

Quality Depreciates

In order to meet the demand, you may start paying less attention to the quality of the product or service you provided than when you initially started. This can be devastating because your original business plan has been all but abandoned at this point, which certainly spells disaster.

Hiring the Wrong People

When you’re growing and expanding, perhaps opening new offices, etc., the rush to get everything up and operational can result in haphazard decision-making. And if you’re allocating the hiring to other personnel, they may feel the pressure to get someone in and trained. But the problem that occurs with that is less attention is paid to the new hires, and they may end up lost and unable to really represent your company that way you intended.

Moving into Less Profitable Markets

If the desire to grow has pushed you into opening stores or reaching out to other markets, do your research to make sure it’s a profitable one. And if the new location could be profitable, check to make sure that the way you’re operating your business will work in the new market. A less profitable market can drag down your overall bottom line for the whole company. Make sure your growth is calculated and will truly benefit everyone involved.

Financial Mismanagement/Lack of Oversight

Forbes lists financial mismanagement as a result of out-of-control growth and how it can quickly spiral out of control. For example, if your small business was run on Word Documents and spreadsheets, but you triple your business, you may not be able to keep track of all the numbers the way you did previously. Hindsight is 20/20, so make sure you have a good accountant on hand to help you through the growing pains.

Overall, business growth is wonderful, and it shows that you’re doing things right. However, if you don’t manage the growth and keep things moving at a pace that works, your business could suffer and ultimately close as a result of the growth.