Rapid Growth! Is There a Downside?

Most entrepreneurs are money-making machines, but usually they are not well trained on strategic financial decisions. Experienced leaders will advice people that are building their companies to take their time to grow. You need to grow slow enough for you to form a good management team. The pressure to keep the momentum may drive you to loose your vision, just remember what happened to Toyota!

How fast you grow must be a strategic decision. The issue of expanding can create a difficult cash flow situation. Usually the company will attack its cash reserve to purchase materials, invest in new facilities or stores in anticipation for the future sales, but cash won’t return until few months ahead. Your company may be exposed to many variables out of your control. What about if the market goes weak and visit website for rapid service you can not meet the sales forecast? If cash is tied up in stores and inventory it is like driving a nice car with half tank in the middle of Mojave dessert.

These are some of the negative aspects of rapid growth:

  1. Rapid growth may create inefficiencies that hurt your service.
  2. Rapid growth strategy can pressure your sales team in reducing prices and affecting your margins.
  3. Distribution may play unforeseen problems, such as volatile gas prices, new regulations, thus affecting your profits.
  4. There will be an enormous human cost. The stress and strain on people during this phase will affect your company.
  5. The values and the culture you had in the beginning could be lost, by making communication more complex.
  6. Rapid growth demands you take your company’s infrastructure to the limits, stretching your equipment and opening the window for major investments on replacements.
  7. Rapid growth may relax your selection criteria on whom are right for the job.

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