When Business Growth is Bad – Part 2

When entrepreneurs start a business they hope and pray that their business grows. Of course! They should! And as a consultant, I take my role very seriously in helping them see growth in their businesses.

But in my last post I mentioned that not all business growth is good. Growth that happens too fast, for example, without any warning, can cause financial, manufacturing, warehousing, and customer service problems galore.

In this blog I want to talk about another problem of too-fast growth.

Problem 2: Rapid growth that is unpredictable may decline and leave a burden on the business. I’ve seen this recently in a colleague’s business. Just two years ago, business was inferno hot for him! He was so busy he couldn’t keep up with orders for the product his business created. Then the economy slowed. Today, his business is sound enough to pay his bills and allow him to put a little away for the future so he’s not worried about feeding his family. But he is concerned about his tax bill. The spike was unexpected and when he pays taxes this year on last year’s income, he’s paying taxes out of less money this year than he was earning last year. Not only that, as a manufacturer of goods, he has a small storage unit full of unsold items. That’s because he ramped up production quickly during that busy season, but he didn’t anticipate the decline… so he was still producing a high number of goods when the slump struck.

Solution 2: When your business grows, manage it carefully. Don’t just ride the rapids with an oblivious smile. Be aware that it may eventually slow down. Make sure you have money put away for taxes and other expenses that might lag into a slower period. And, watch the warning signs very, very carefully to make sure that your production doesn’t match today’s demand… but rather, that it matches tomorrow’s demand. Warning signs might include slowing orders, but even that might be too late. Get in the habit of proactively calling your customers and estimating capacity into the future. Offering discounts on bulk orders, even when times are good and customers are willing to pay top dollar, can help you keep your finger on the pulse of your customers’ needs.

So, business growth that is not carefully managed and spikes, then falls, can also be costly for a business in inventory and warehousing, taxation (and other lagging costs).

In the next blog, I’ll talk about one more business growth problem I’ve seen.

Related posts:

1. When Business Growth is Bad – Part 3
2. When Business Growth is Bad – Part 1
3. Business Growth in Ten Minutes a Day
4. Business Growth in Ten Minutes a Day… IS Possible
5. Growing Your Business: Why Separating Business and Personal Finances is Good