RYAN CRAWFORD: The problem with rapid growth

It raises the question seldom heard in business circles: Can too much growth be detrimental to a business?

A business simply can’t cope with revenue growth faster than its resources can support. Not enough revenue, however, and you can’t support your resources!

As business owners, our aim is to achieve growth at a sustainable level based on sound principles. Having a comprehensive business plan, sound financial management and good communication is a great place to start.

Reviewing the business plan annually helps to ensure the business is meeting its short-term objectives and remains on track to reach its long-term goals.

If you don’t already have one leading the direction of your business, consider developing a risk mitigation strategy. This aims to understand how changing market conditions could impact the business and the course of action you would need to take for various scenarios. It will facilitate a proactive approach in a downturn or market shift, minimising the potential negative impact on the business’s bottom line.

In the property industry we can at times become focused on the past, reporting on monthly sales and PM results historically. The implementation of accurate 90 day cashflow forecasts allowed our business to operate with a much greater level of confidence when setting goals and expansion plans for the future.

Further, know your break-even point and your sustainable growth rate (SGR). When calculating the SGR of your business consider the maximum growth the company can achieve organically without having to increase its debt. Excessive revenue growth and capital expenditure without increased profit margins can result in a company increasing in value but running into cash-flow problems as it struggles with the increased operational costs and demands which accompany rapid growth.

Establish or review your internal and external systems and processes. Even small companies need to establish procedures to uphold standards, as fast growth will certainly put your brand’s service model, communications and procedures to the stress test. Having watched our business struggle through a number of rapid growth periods, I recommend getting ahead of the curve by conducting an audit and assessment of your service model each and every time the business increases its turnover organically by 25 per cent. This milestone will usually show the cracks and shortfalls in a company’s structure and service model.

A great low-cost way to conduct a service health check on your business is to gain feedback from staff and customers via online surveys. This will assess if any improvements are needed and identify any shifts in your service model and client experience.

Fast growth can be as dangerous to a new business as not enough growth. Planning for it after your business has grown by 50 per cent is no plan at all and a recipe for disaster. When planning your next major campaign consider the client journey from introduction right through to after care.

Planning in advance for your expected growth will help ensure you remain in touch with and recognisable to your customers as the business continues to grow.