Before you start hearing “the room getting loud” and everyone wants to know if you’re going to hire or expand or launch or get into a bigger system, take the time to review the numbers. Open up tabs for supplier invoices, create a sales forecast, and ask yourself…when am I going to have enough money for all of this? When did my expenses rise, and when will my cash flow stabilize?
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Growth doesn’t always begin with a meeting in a boardroom. Growth begins quietly as your business expands and your confidence grows. As your business is growing, so are your costs. And many times, your confidence in being able to continue growing is determined by more than just last month’s revenue.
Read The Numbers
Before you grow, you want to determine how much your business can afford to spend. This includes reviewing your profit margin, cash inflow cycle (how long it takes for money to come in), amount of debt, inventory needs, employee costs, and the length of time between investing money and having that money returned.
As a small business owner, growth can expose weaknesses in your business very quickly. Even though your business appears busy, it could be financially stressed due to slow-paying clients.
Determine Where Your Risks Actually Reside
Not all financial uncertainty means stopping or pausing. Many times, financial uncertainty means looking closer at things. Ask yourself: Where are the areas of my business that are most likely to put me under stress? Am I counting on one large client for all of my revenue? Have my operational costs become “fixed” before I have earned a stable income level? Do customers take longer to pay their bills? Are there new markets I’m entering where customer payments, refunds, charge-backs, or compliance checks become more complicated?
Some e-commerce businesses operate internationally or within more heavily regulated industries. Working with an international high-risk payment processor may become part of the broader financial discussion for these types of businesses. The key here isn’t necessarily processing payments but understanding how cash flows into your business, how delays occur, and what safeguards exist to protect against delays and potential losses. The more clearly defined your risk is, the better positioned you’ll be to manage and lead through that risk.
Grow In Stages You Can Measure
You don’t have to make every decision related to growth at the same time. While faster scaling may allow for quicker expansion and increased revenue, slower scaling can provide greater benefit as each stage provides opportunities to learn valuable lessons.
Check demand before making permanent commitments such as additional staff or equipment. Improve systems before hiring employees. Develop a sufficient cash reserve before increasing inventory levels. Reassess pricing strategies before anticipating that increased sales alone will improve profitability margins.
Good leadership during periods of uncertainty is typically practical rather than bold. Provide yourself with options to adjust course. Protect your company from unnecessary pressures. Make decisions based upon what is currently occurring today rather than only upon what you anticipate will occur tomorrow. While growth may require some discomfort, it should never be done blindly.
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