Signs your business could be growing too fast

Entrepreneurs crave business growth, but if your company expands too quickly or you start to overtrade, it could prove disastrous.

As your sales soar, your costs will likely also rise, so you need sufficient cash flow, financing, and staff to ensure that your business scales sustainably.

Spotting the signs of growing too fast

It’s essential that you are aware of the signs that your business is growing too fast so that you can tackle them.

Indications that your business is expanding too quickly include:

The risks of growing too fast

A business growing too fast can lead to operational and financial instability.

Costs rise as a business expands, so your working capital can quickly deplete, resulting in cash flow challenges.

The orders might be flowing in, but you lack the funds or other resources to deal with them.

The rush to deal with the sales can also result in quality issues and the need to fix problems, which may add even more costs.

Finally, as your business grows, you might neglect to chase money customers owe you.

This means invoices remain unpaid, and you’ll miss out on cash that you need to fund business growth.

Financial planning and cash flow forecasting can be used to tackle all of this.

You can predict how your business will grow and ensure you have the funds to deal with it.

How to tackle the causes of overly-fast growth

Here are ways to tackle some key causes of a business growing too fast.

Cash flow challenges

If your business grows too fast, it can result in more money going out than you have coming in.

This is due to increased expenses to meet sales demand.

It is also common to experience multiple unpaid invoices from customers because you’re too busy to chase them.

To tackle cash flow challenges before they happen, put in place a growth reserve of funds to prepare for such eventualities.

When forecasting your cash flow, it’s wise to overestimate your expenses and underestimate your revenue.

This means you may be more likely to have funding available if costs increase.

You might need to consider external funding to tackle your cash flow problems.

As you grow, it can be harder to track all your finances.

Accounting software helps monitor sales and expenses, as well as dealing with the late payment of invoices.

Low staff morale

Your business needs engaged and happy employees if you want it to be successful, but the pressures of fast growth can cause staff to feel stressed out and unhappy, leading to a fall in productivity and efficiency.

A pay rise is one solution, but your budget may not allow for that, and more money won’t necessarily solve the problems.

Look for other ways to improve staff morale by recognising their achievements and listening to their concerns.

You could also offer benefits such as flexible working and access to wellness activities like yoga and healthy eating.

Rather than taking on full-time staff, outsourcing areas such as marketing and admin can be a more cost-effective method and a way to reduce the pressure on your in-house employees.

Bad hires

As a business scales, you will likely need new employees.

However, you should be careful about panicking, acting too quickly, and recruiting the wrong people for the job.

Ensure that you have a strategic and effective recruitment process to take on the right staff who benefit your business for the long term.

Regaining control

Strategic planning is crucial to managing growth.

You need to set realistic targets and pace your expansions so you don’t scale too quickly.

To do this, create a growth plan that sets out your business targets, goals, and ambitions with details on how you will achieve them.

You could think about including an overview of your finances to ensure that your business is financially stable enough to achieve your objectives.

This can also help identify if you need external business funding.

A cash flow forecast should be in your financial overview.

This is an estimation of the money you expect to bring in and pay out over a period of time.

It should reflect all your likely revenue sources and your likely expenses.

Other financial forecasts to include are a profit and loss account and sales predictions.

Flexibility is important in growth plans, and you should review it regularly to ensure you remain on track and your business isn’t growing too fast.

If it indicates that expansion is too quick, you should take action and adapt your objectives accordingly.

External funding options

External funding can be used to ensure sustainable growth.

If you’ve already secured a Start Up Loan for your business, you may be able to apply for a second loan.

For fast-growing businesses with cash flow challenges, invoice finance could help.

This form of funding gives you quick access to finance without waiting for invoices to be paid.

With invoice factoring, a provider lends up to 90% of the value of invoices and collects payment directly from your customers.

Invoice discounting is similar, but you keep control of customer payments.

Other finance solutions include:

  • overdrafts – a line of credit that allows you to withdraw more than the funds you have available in your business bank account
  • business loans – secured or unsecured lending paid back, with interest, over an agreed period
  • purchase order financing – a loan given to your supplier by a lender for the goods your business needs.

Getting help

There is a wealth of support available to help entrepreneurs grow their businesses in the right way.

Your accountant should be able to advise you on effective growth, while a mentor can provide an unbiased assessment of your strategy.

When you are approved for a Start Up Loan, you qualify for 12 months of support from a mentor.

Networking events and business groups can also give you access to growth experts.

Want to learn how to manage your start-up’s finances? Check out our free online courses in partnership with the Open University on being an entrepreneur.

Our free Learn with Start Up Loans courses include:

Plus free courses on finance and accounting, project management, and leadership.

Disclaimer: While we make reasonable efforts to keep the information on this page up to date, we do not guarantee or warrant (implied or otherwise) that it is current, accurate or complete. The information is intended for general information purposes only and does not take into account your personal situation, nor does it constitute legal, financial, tax or other professional advice. You should always consider whether the information is applicable to your particular circumstances and, where appropriate, seek professional or specialist advice or support.

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