Managing a Small Business Managing Growth -Managing Fast Growth

Managing a Small Business Managing Growth -Managing Fast Growth

Managing Fast Growth
Fast growth in and of itself can help
motivate employees and help project a
very positive image to customers. So
trumpet your successes continually to
both employees and customers!
When setbacks occur, explain them to
employees. But, certainly, depict them as
small blips in your course to success.
Everyone wants to feel like he or she is on
the winning team or buying products or
services from the winning team. Success
does breed success.
Sustaining fast growth can be tricky,
though. Preserving cash, keeping people
motivated, and continually finding more
office space are just a few of the issues
that you will encounter. The farther in
advance you can plan and prepare for
such challenges, the more likely it is that
you will be able to minimize any negative
effects.
Following are a few of the growth issues
you may have to contend with.

Hiring
A fast-growth business means lots of
hiring. And it’s very easy to
underestimate the time and direct costs
of hiring lots of new people—and the
right people. You will need to spend
considerable time developing job
descriptions, posting help-wanted ads,
sorting through resumes, conducting and
arranging phone and in-person interviews,
and checking references. Even if you are
very busy with other issues, you can’t
afford to skimp on the amount of time
required to conduct a careful hiring
process. If you hire someone who can’t
perform the job satisfactorily, your
business performance will most likely
suffer. If you have to fire someone you
will engender bad morale and run some
legal risks. Or you may hire someone who
can adequately perform the task, but has
an attitude problem — the hiree might
want to be doing something else or
working at another firm. This type of
person will not perform to his or her full
potential and may quit. Either way, you
will have to go through the entire time-
consuming hiring process again.
Unless your company is large enough to
have a human resources manager, this
time will be spent by you or other
managers. It is time taken from the
management of ongoing business
activities. It is difficult to predict how
much time will be involved in filling
positions, especially senior positions,
because the response to help-wanted ads
can fluctuate greatly from one week to
the next and, even with a terrific
response, it is difficult to gauge how
interested any given candidate is in the
job until you actually offer it.
Help-wanted advertising can be
expensive. Many small businesses
underestimate the out-of-pocket costs
necessary to conduct a employee search.
Because responses to help-wanted
advertising can be erratic, firms often find
themselves advertising over an extended
period of time in order to attract qualified
candidates—especially for more
demanding positions. Be prepared for the
cost!
People
While every business benefits greatly
from having good people, the importance
of having above-average people in a fast-
growth business can’t be
overemphasized. Workloads will
constantly be expanding and may not be
predictable. New issues and problems will
constantly pop up and innovative
solutions will have to be implemented
quickly. You need people who can think
on their feet, adapt well to constant
change, and put in the extra hours that
will be needed to get you through the
unusual pressures and surprises of
managing a business in upward transition.
You need people who can get excited
about being a part of your growing
business!

Stagnant managers
One of the thornier issues you are going
to confront in a fast-growth business is
that some people, even those who are
committed to your business and work
hard, won’t be able to adjust to the
changes brought about by growth. For
example, the person who supervised two
people in your warehouse well when you
first started out may not be able to
manage a team of forty. As the business
grows you need to make hard and
objective assessments of your key
managers. Are they up to handling an
increased or changing workload? Can a
strong assistant, supplemental education,
automation, or computerization bring a
weaker manager up to speed? Do you
need to bring in a more senior manager
to oversee that person’s work? Or do you
need to make the most difficult decision
of all and replace them? Even one weak
manager in a key position can really drag
down the performance of an entire
organization.
The impact of new people
Current employees often feel threatened
by the influx of new personnel. Senior
employees are likely to feel that their
stature within the organization is being
undermined, and less senior people may
feel that they are being neglected.
Before you advertise for new positions
you should work to retain the confidence
of existing staff. Involve your employees
in the process of structuring new
positions. If a new position will cut into
the responsibilities or authority of a
current employee, meet with that
employee privately to discuss the need
for an added position and, if the
employee’s performance has always been
satisfactory, say something positive about
that performance or contributions to the
company. Emphasize your confidence in
his or her ability to continue being a
positive asset to the company. Post all
job openings internally at the same time,
if not before, you place outside
advertising.
When you are interviewing candidates for
new positions, consider having all
employees who may be threatened by
the new position participate in the
interviewing process. This will make them
feel more confident about their position
within the organization and less
threatened by the new hire.

Money
Fast-growth businesses burn money! Even
with good profits, there will almost
certainly be times when a growing
business will run tight on cash as
expenditures occur before related sales
are realized. Businesses with inventory or
receivables will run into this situation
particularly fast. But all fast-growth
businesses are going to run into plenty of
unforeseen costs.

Planning
The faster a business is growing or
changing, the more difficult it will be to
plan future expenditures or income. But
you must! Careful planning and constant
updating of plans, particularly cash flow
projections, is of tantamount importance
in a fast-growing business. While most
businesses may do a major overhaul of
their projections and business plan once a
year, with minor updates monthly, a fast-
growth business should consider
completely revamping its plans, or at
least its cash flow projections, several
times during the year as significant
deviations from what was projected occur
in ongoing sales and/or
expenditures.
Because fast-growth business expenses
have a tendency to skyrocket faster than
sales, you need to stay on top of the
changes in projected cash flows. This will
enable you to make timely cuts in
expenses and, if necessary, slow growth
so that you don’t run out of money. Have
in mind which areas can easily run on less
cash or maintain momentum even with
less growth.

Profits
In a fast-growth business it is very easy to
become excited about rapidly rising sales
and lose track of profits. This is especially
true when an organization shifts from a
very small entrepreneurial organization to
a professional organization with many
managers. Be aware that during the
transitional phases overhead expenses
can mount rapidly!

Profit margins
Fat profit margins are essential for
growth. If you are trying to attract
outside investors, banks, or other lenders,
they will want to see good, healthy profit
margins. More sophisticated lenders and
investors will also pay a lot of attention to
the trends in your profit margins. You will
need fat profit margins even if you are
trying to finance growth internally. A
business with a 10 percent profit margin
can financially sustain twice the growth
rate of a similar business with only a 5
percent profit margin.
Fat profit margins leave more room for
error. With thin profit margins even a
small mistake or expense
underestimation can plunge your firm into
an unprofitable state.

Taxes
It is easy to underestimate the impact of
taxes when planning for a growing
business. Don’t assume that taxes rise
parallel to raises in sales. As your
business becomes more profitable and
grows, your tax bill will likely increase at a
higher rate than anticipated because
either you personally, or the company (if
it is incorporated), will move into a higher
tax bracket.
You should also remember that the size
of your quarterly tax estimates will need
to increase in order to cover the total
yearly increase in taxes.

Facilities
A fast-growth business may need an
increasing amount of space to house
additional equipment and/or personnel.
You could anticipate growth and lease an
initial space that will accommodate plenty
of future growth, but this commits you to
a space larger than you need now and
squanders money needlessly. Or you may
find a landlord willing to rent space on a
short-term basis—six months to a year—
so that you can upgrade square footage
with some immediacy. But moving can be
disruptive to operations. What should you
do then?
Compromise! Try to attach an option to
your lease that allows you to continue
renting for renewable twelve-month
periods of time after an initial two- to
three-year firm commitment. And look
for a facility that has a small amount of
growth space for your operations. If your
space becomes crowded, explain to your
employees that these conditions aren’t
forever and that you foresee moving to a
more spacious facility soon. If the
overcrowding is severe, consider renting a
separate, nearby space for one group or
department until such time as you can
rent a space large enough to hold all of
your staff.

* Source Streetwise Small Business
Start-Up