rapid growth has its challengesLet’s look at the rapid growth stage of the small business growth cycle and see what you need to navigate this challenge.  I don’t spent much time on this growth stage because it represents the opposite of what most small businesses want in their professional life – big corporate structure.

While many small business owners say they want to grow their business, most of them don’t really understand what that means.  In order to have rapid growth a company needs to create everything that caused many small business owners to leave corporate America in the first place.

To get to this stage then the owner set the goal to grow the business set in the self-sustainability stage.  Here you need large sums of capital as the business takes on more and more customers thus needing more equipment and materials.  Also, the number of employees to service these new customers seems ever expanding.  When done properly in this stage, a small business becomes big company.  However, not managing this stage properly has caused the death of many companies.

What’s Important in Dealing with Rapid Growth?

Essentially the goal in the rapid growth stage you manage finances effectively so that growth does not outpace your financial resources.  As a result, here are the objectives that go along with this goal:

  • Financing rapid growth is critical to this stage.
  • Learn to delegate better so you can improve managerial effectiveness.
  • Managers must be extremely competent because of decentralization.
  • Talented managers and key employees are critical to success
  • Company systems must be tested, altered & delegated, with strong strategic leadership from top management
  • Use marketing to move into new markets and gain market share
  • Partner with businesses complementing existing experience & capabilities
  • Get deeper into existing markets by adding new products or services
  • Existing business expands into new markets & customer types

Additionally, this stage brings a number of different challenges and risks.  As an owner you must rise to the occasion in this stage or any one of these things can consume and destroy the company.

  • High demand of cash creates a high debt-equity ratio
  • If unsuccessful, business can fall back and find equilibrium in earlier stages.
  • Moving into unrelated businesses is disastrous
  • CEO risks losing firm by saving money on talent

Taking a look at the leadership and management factors of this stage in the table that follows you begin to see the very corporate aspects of this stage.  For those small business owners not familiar with the small business growth cycle entering this stage begin to experience stress, frustration, confusion, and begin getting sick of their business.

Leadership Factors:
Owner goals
  • Committed to a growth strategy
  • Founding owner may opt out with an advisory role
Operational Skills
  • The owner should be completely removed at this point from the operation.
Managerial Abilities
  • If owner can rise to the financial & managerial challenges company can become a big business.
Strategic Thinking
  • Operational and strategic planning include managers
 

Management Factors:
Financial Assets
  • Adequate financing
  • Establish expense & budget controls for strong cash flow.
  • Profitability planning systems

$$$ Sources:

  • Joint ventures
  • Banks
  • Licensing
  • new investors
  • partners
Personnel Resources
  • Skilled, experienced & competent mgmt structure
Systems
  • Systems become more refined and extensive.
  • Performance control systems develop enterprise complexity
  • Effective financial planning, forecasting, modeling strategy
Business Assets
  • Strong potential for business sale premium
  • Capacity for a big business

learn the facts about rapid growthYou can see where for someone without a love for business this can quickly become an albatross and is why many small business owners become disillusioned.  We built the Business Growth Matrix specifically for this reason, so you can see what to expect at each stage. As a result you can make an informed decision on where you want to take your business and what you expect as a result of your decisions.

For those readers that have entered this stage of the cycle what can you share with the other readers of your experience?  Is it more difficult than you thought? Would you make the same decision based on what you know now?