Let’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: |
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Owner goals |
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Operational Skills |
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Managerial Abilities |
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Strategic Thinking |
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Management Factors: |
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Financial Assets |
$$$ Sources:
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Personnel Resources |
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Systems |
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Business Assets |
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You 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?
Good piece, and insightful thoughts. Over 25 years ago I set a goal of making the Inc 500 – and not just making the top 500, but the top 100. I did it, 8 years later my company was #99. (1993). The price was high though, and in hindsight, I would not do that again.
Craig,
Thanks for sharing. You’ve made a very good point that I see with clients all the time. They don’t understand the sacrifice that comes with the commitment. Then once they get started they destroy other parts of their life or realize that growing the business didn’t really give them the life fulfillment they were looking for.
Thanks again Craig, strong words from someone that’s been there!
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[…] Rapid growth, is something many small business entrepreneurs aspire to achieve, but it is not without significant risks, for those who choose to go down this path. Unfortunately, many seeking rapid growth embark on the journey without fully understanding exactly what is involved, and not knowing the levels of risk of failure of the business, that is inherent in growth for growth's sake. This excellent article, discusses what is involved in setting the stage for rapid growth, and outlines the objectives which need to be set and met, in order for rapid growth to be effectively managed. […]