Frightening as it may sound, growing your business too fast may often mean the downfall of it. So many businesses come up at a rapid pace and one day we find, they are nowhere on the map. What happened? Why is it that the business had to close its doors? The reasons are many but the topmost among these are as follows
Why Businesses fail
-Your business is growing out of control – There is no proper accounting system -Your business does not have a cash cushion -There is no efficiency in business operations and business growth strategies – The business growth management is unfit or dysfunctional
When your business grows too fast
When your business grows faster than you can handle it financially, you seem to end up with more customers and orders than you ever thought of. In such a situation, due to any number of reasons, like poor debt collection, payments not made on time, bad management of working capital, you are unable to get the money to fulfill those orders and service the customers. Moreover you have to meet your current bills and urgent obligations. When you bite off more than you can chew, when you stop meeting customer expectations, when you are not able to pay suppliers, employees and others on time, business will take a downward spiral and you will have to close shop by force or by choice.
How do you Grow Your business without going broke
This is easier said than done. Firstly, all the reasons why businesses fail have to be tackled as different aspects of your business growth strategy. The most important thing to keep in mind here is – Working Capital. The following tips if taken seriously, will help save your business from an untimely closure
A strong payment and collection system
Ensure that your payment and collection policy is perfect. Make sure that you get paid when you expect it or have forecast it. If you use discounts or firmly demand the payments upfront, or a combination of both, your cash flow will not suffer.
Take charge of your expenses
If you find that growth is going out of control, and that you are eroding into your capital to meet the growing needs, its best to find ways to slow down the expenses. It would be better to delay, extend or ignore the cash outflows for the time being so that you have more money that comes in than what is going out.
Have a hold on your working capital
Working capital is most essential . So learn to manage it. The very first lesson is that if you are paying your vendors in 30 days credit period and giving your customers a 60 days credit period, you have got it all wrong. It makes no sense and does not work either. It needs to be switched the other way round. Make sure to get your money in hand before it has to go out.
Control your growth
It will sometimes mean that you have to turn down business and that may hurt, but you need to do it to balance your business growth strategy. If you feel you cannot meet the needs of a new customer, you have to say ‘no’. It is better to say no than saying yes and not being able to deliver . All you will be doing is perhaps bruise the customer’s ego, but you will still remain in business.
Its better to be safe than sorry. So when you follow the rules of balancing your business growth strategy, manage your working capital and deal firmly with customers regarding payments, make sure that the cash flow is not affected, then there is no fear of driving yourself out of business.