A Business Who Grows Too Fast

I can’t afford to do business with you.

To some, this may seem like an absurd statement. You are probably thinking, “of course I want more business. That will mean more profit.” Some sales trainers will boast of helping companies increase 200% – 500%. I once asked one of these trainers if they have kept track of the business that failed because of their increased sales. He had no comment. Let’s take a closer look at what typically happens when company grows too quickly.

Every business has a limited capacity of customers they can effectively handle. If the company exceeds that number, they will start to disappoint their customers. A scorned customer is likely to tell everyone they can reach of their disappointment. They will tell friends, coworkers and even post their complaints in the Internet, for everyone to read. You will soon see your customers leaving, because you oversold your capacity. This is a common problem when your sales manager has more influence then your production and quality control managers. But you don’t need to be a large company to experience this problem. Micro business with only one person can easily become distracted by the excitement of the sale.

Many companies hire new employees to try to fill the demand for their products or services. But if you do that without the proper training, your errors will increase, productivity will fall and morale usually plummets.

By the end of the second year, the company is in deep trouble. The sales department needs to spend many more hours to obtain the required sales, but the limited results can’t continue to support the cost of the operation. If things do not turn around soon, they are headed for bankruptcy court.

When companies decide to service the giants like General Mills, Nike, Intel, Microsoft and many other large companies they are shocked by the heavy demands and slow payment. It is common for these giants to stretch payments from the expected 30 days up to 120 or 180 days. If you do not have the capacity to carry the additional costs of financing the debt, you too could end up out of business. As a vender, you are considered expendable. There are many other companies lined up to replace you, as you beg for payment.

Huge companies also pay much smaller margins then smaller companies. You may need to survive on a 3% profit margin while dealing with the slow payment and 500% increases in operating costs.

Slower steady growth is much more manageable and profitable in the long run. You are able to make corrections quicker and prevent the nightmares mentioned above. You can hire and train employees at a reasonable rate, rather then hiring someone during a time of crisis.

Your banker will also appreciate a more manageable growth plan. At some point a more experienced manager then the twenty something clerk that took your application must approve your business loan. Banks are very concerned about losses these days. Few are willing to take a risk on a company growing at the rate of a fighter jet. They have warehouses full of bad loans, which were made to reckless business people in the past.

By slowing your growth, it will not be your dead dry bones hanging on the wall of some purchasing agent, displayed as a trophy of his conquest. Let them laugh at someone else!

Ken Bear Cole

A Second Look Business Consulting LLC