Watch your Business Growth

You need Good Growth

" There are two types of growth - healthy and unhealthy ..."

A business needs to have growth. If you don't grow you are standing still. If you are standing still you are basically going in reverse. Growth should be part of your business dream, because when your business grows then your net worth grows and in later years you will have wealth and assets to leave to your family and those you love.

Growth is respected in the marketplace. Growth shows that you are doing well and nothing will stop you in your quest for success. A growing business is a winning business. It also affords you what are commonly known as “bragging rights”.

Be aware, however, that there are two types of growth - healthy growth and unhealthy growth.

Don't Grow Too Fast
Believe it or not, you can have a business that grows too fast. Fast growth without other things in place could be disastrous. You can calculate real growth by investigating and assessing the financial situation of the business. Just because a business has moved into larger premises or taken on more staff, or uses the latest vehicles - this does not necessarily mean the company is experiencing healthy growth. It may be unhealthy growth because the business could be in greater debt than in the past, or it may be because the so-called expansion may not be supported by increased sales and profits.

Financial Accounts need to be Monitored
A glimpse at the profit and loss and balance sheet of the business is the main indicator of real growth. If the financials are healthy, then the company is healthy and so growth is healthy. Healthy growth shouldn't be measured simply by increased sales because growth and sales figures do not necessarily mean growth in profits. Growth in sales could have arisen because of heavy price reductions or discounting, and even if the total dollar sales figure rises the discounting erodes the profit margins in those sales, resulting in very little profit to the business.

Watch for Unhealthy Growth
In unhealthy growth the profit and loss accounts will show clearly the poor profitability of the business and will point to the fact that the profits are lagging behind any increase in sales or other assets such as equipment or staff. If the balance sheet of the business is poor, this will also indicate that the increase in the value of the business (net worth or equity) will be falling behind the increase in its debts. What this means is that a business can grow too fast.

If this is happening, then the business will experience cash flow problems and then there will be a lack of profitability that is compounded by such things as increased stocks and low collections of debtors etc. Cash flow problems will show up very quickly, but can only be a guide because there are many other factors pointing to the business having problems with fast growth. Some other factors would be: unhappy customers, dissatisfied staff, the administration systems not able to cope and tired, disillusioned business owners.

As your business grows you need to grow with it and this could mean making adjustments to your role, such as delegating more responsibilities to others so you have more time to take overall control of the “ship”, as it were.

If you have problems balancing business growth with other problems coming to the fore, then it may be time to talk with your accountant or other astute business advisers. If you do some brainstorming, you should be able to set out a plan that will not simply reign in the growth (you don't want to reign in too much growth), but allow the business to grow at a steady pace and not run ahead of other support services and resources.

Fast business growth is great, as long as the growth is harnessed, properly directed and in balance with all other issues needed within a business so that all factors come into play together as a team, with the one purpose in mind - to attain profitability in that business.