Rapid growth can happen as a result of a well-executed growth strategy, large investment or in response to an unexpected opportunity. This type of growth often follows a period of early success, when a startup has seen only modest profits but is operating healthily. When your business is experiencing a period of rapid growth, you may find that staff, production levels or clients greatly increase over a short period of time.
Responding to cash flow shortfalls
As your startup increases in size, you will need to more capital to pay for more staff, bigger facilities and increased production costs. If the rapid growth of your business is unplanned, you are at risk of not having enough working capital (cash for day-to-day expenses) to fulfil your expanding enterprise.
Shortfalls in working capital during the time between investing in growth and realising the profits is a common problem for businesses experiencing fast expansion. There are a number of strategies for dealing with short-term cash flow issues.
Dealing with cash shortages
Immediate ways to fund unexpected cash shortages, including:
- Increasing prices
- Collecting outstanding debts
- Negotiating better payment terms with customers – for example, by offering discounts for prompt payment, encouraging automated payments or insisting on deposits first
- Using factoring or invoice discounting services – a company lends you money, collects your debts and manages your books for you.
- Negotiating better payment terms with suppliers – for example, delaying payment in exchange for regular or bigger orders
- Identifying any non-core business assets that can be sold for cash
- Taking no unnecessary money out of the business while its cash flow is limited
Another effective way of increasing your liquidity is to reduce costs by:
- Reducing overheads – for example, substituting business travel and face-to-face meetings with conference calls.
- Opting to lease or hire-purchase new premises or machinery rather than buy outright and incur more debt
- Taking no unnecessary money out of the business while its cash flow is limited
Monitor and forecast cash flow
To improve your cash flow in the longer term, cash flow will need to be monitored and forecasted. Monitoring and forecasting your cash inflows and outflows means you can better predict cash flow shortfalls. This allows you to take action early to respond to your predictions.
Responding to staffing and skills shortages
The ability of your business to succeed will depend on the skills and expertise of your staff as well as your ability to communicate effectively with them. Clearly communicating throughout this period of change and uncertainty, to keep staff in the loop and motivated.
Hiring new staff
It is likely you will need to employ more staff during your business’s expansion, for your teams don’t have an excessive workload or carry out duties beyond their skills and expertise. It is important to spend enough time on recruitment activities, because employing the right people with appropriate skills will give good results in the long term. To assist your hiring activity you may consider working with a professional recruitment firm, like Regional Recruitment, to help you acquire the right talent for your business.
Tending to existing staff
Existing staff also need your attention and care during your business’s rapid growth phase. Staff may be carrying large workloads, feel uncertain about their future role in the business or cope poorly with major changes in the workplace. Make sure you keep your staff informed and engaged during this period of upheaval. Regular and open communication is key Communicate with your staff about your business goals, expectations and progress as well as operational matters such as changing roles and procedures.
The key thing with to cope with rapid growth is to try as much as possible to run your business as usual, tending to your customers and staff.
Related articles
- Buying commercial real estate for your start-up business (thestartupmag.com)
- Five tips for quick and efficient recruitment (thestartupmag.com)
- Is it worth the risk for your business to hiring a graduates? (thestartupmag.com)
