Most small business owners dream about rapid growth, but there is such a thing as growing too fast – and it happens when your company expands quicker than your capital, infrastructure, and capacity. Suddenly, your growth becomes a liability with serious financial and operational repercussions.
Growing for growth’s sake isn’t the way forward. Instead, you need to do it sustainably. And that requires planning, financial visibility, and the foresight to tell when things are going too fast.
In this blog, we’ll help you identify the warning signs and understand how to get back in control to help your business succeed in the long term.
1. Cash flow under pressure
Winning more business without taking the appropriate actions to mitigate the cash deficit can quickly become problematic. Warning signs include:
- Waiting longer for customer payments
- Making larger purchases that aren’t showing ROI quick enough
- Struggling to keep up with increasing payroll, VAT, and tax
Even though your clients and customers are increasing, you might run out of cash before you can reap the rewards.
2. Constant firefighting
Growth requires the additional capacity to handle it. While it’s one thing being busy, your business is at risk when it’s in a constant state of catch-up. Warning signs include:
- Always solving urgent problems
- No time for strategic planning
- Reactive rather than proactive management
Operational strain often leads to poor decision-making and can be detrimental to the long-term sustainability of your business.
3. Profit isn’t keeping pace with turnover
Revenue can grow faster than profit, and revenue comes with costs. Without proper planning, those costs can quickly outweigh your top line, leaving your bottom line to suffer. Warning signs include:
- Rising overheads
- High recruitment costs
- Lower margins
Sales don’t always equate to profit. What pays is to grow intentionally at a rate you can really afford.
4. Systems falling behind
If the ways of working you started with are no longer working, you might have grown quicker than your systems have developed. Warning signs include:
- Time-consuming, tedious bookkeeping
- Disorganised, hard-to-digest reporting
- Inefficient financial processes
If business growth happens before your financial systems have evolved to handle it, you can find yourself consumed by accounting when you should be leading your business forward.
5. Lack of data to support big decisions
Higher growth comes with higher stakes, and every decision has big implications. That’s okay if you have the numbers to back them up, but dangerous if you don’t. Warning signs include:
- Hiring without anticipation of recruitment costs
- Borrowing reactively instead of proactively
- Knee-jerk investment in equipment or premises
Timely management information empowers you to make the right decisions both in real time and ahead of time. Without that, you’re shooting in the dark.
Long-term growth beats fast growth every time
If business is going well, that’s a good thing. But rather than keeping your foot on the pedal, take it as a sign to get the right financial foundations in place to ensure you can grow sustainably rather than erratically. For example:
- Financial forecasting can help give you foresight into cash requirements, profit expectations, and investment needs
- Cash flow planning can help you identify capital requirements, make strategic funding and financing decisions, and plan seasonally
- Management accounts and business advice can help you monitor your budget effectively with margin and KPI analysis
Ultimately, this will empower your business to make strategic decisions that support growth rather than making split-second decisions to keep up with it. That’s the foundation for a business with longevity.
Grow sustainably with an accountant who gets you
At Nabarro Poole, we specialise in helping small businesses achieve clarity, foresight, and opportunity from their finances. Our owner-managed practice focuses on removing the hassle from accounting, helping you keep up with the essentials while empowering you to plan ahead and grow.
For valuable advice and growth-focused accounting services, get in touch with our team today – we’d love to hear about your business!
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