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What do all the over 15 million small business owners in the U.S. have in common? They all want their businesses to grow.
Sadly, not all owners achieve this goal. The high failure rate of small businesses is well-documented. One of the main reasons so many small businesses collapse is that they are unable to handle the challenges that come with growth.
If you’ve put in the hard work and your business is starting to show signs of growth, now isn’t the time to take your hands off the wheel and relax. Growing businesses face the highest risk of failure.
In this article, we are fleshing out some of the biggest challenges your growing company might encounter. Read on!
1. Cash Flow Management
Revenue growth is a classic sign of business growth. One would think this makes it easier for a business to run its operations, but it’s not often the case. Of the small businesses that fail, about 82 percent attribute their failure to financial problems.
An increase in revenues tends to give some business owners a false sense of financial security. It’s not uncommon to find businesses experiencing revenue growth making reckless expenditures. For example, a business can move into a bigger commercial space because the owner feels they can now afford it.
The problem is revenue growth isn’t permanent. It can fall off, sometimes unexpectedly. If a business increased its primary expenses, a fall in revenues can leave it unable to meet its financial obligations.
It’s prudent to practice proper cash flow management when your business is seeing a surge in revenues. Don’t rush into making cash-intensive moves, such as opening new stores or setting up your own manufacturing facility.
Growing companies need to expand their workforce. But what’s so hard about recruiting employees?
For starters, behind every successful organization is a dedicated workforce. It takes time and expertise to hire the right employees and build a strong team. Recruiting isn’t just about making job adverts and interviewing applicants.
Yet, many small business owners don’t have the requisite recruitment skills to properly staff their companies. Some don’t even know what kind of positions they need to fill. This can lead to understaffing or overstaffing.
Hiring unsuitable people is also a common problem. A bad hire will not only lower your business’ productivity but also increase your operating costs. According to experts, a bad hire can cost your business anywhere from $17,000 to $240,000.
Recruitment challenges are especially more pronounced during a global business expansion. From language barriers to labor shortages in foreign markets, building a global workforce isn’t easy.
Thankfully, you can partner with a professional employer organization. A PEO will manage several aspects of human resource management, including recruitment, payroll, and administration. Find more info here about how a PEO will help your organization.
3. Inventory Management
When your business is growing, your products are flying off the shelves. This is a great position to be in, but it can also present inventory management issues.
Of course, the natural step to take when your product is selling like hot cakes is to add more inventory. However, some business owners don’t have the tools to determine how much more stock they need to acquire and in what period. In the worst-case scenario, this could leave the business with either stock shortages or dead stock.
Running out of stock means you won’t fulfill customer orders on time, which hurts their satisfaction. Deadstock, especially if it’s perishable, will result in losses.
Managing your inventory in times of business growth requires you to have a good understanding of what’s driving the growth. This way, you’ll be in a better position to make sound inventory management decisions.
For example, if the growth is largely arising from an aggressive marketing campaign you’ve been running, sales will likely pick up and then decline. In this case, you don’t want to keep more inventory than is necessary.
4. Technology Adoption
In a digital world, businesses have no choice but to embrace digitization. Technology gives your business a competitive advantage.
However, it turns out that going digital isn’t so simple. Although technology is rapidly advancing, many growing businesses struggle to keep up. It’s no wonder about 80 percent of enterprises are running on legacy technology – in 2022!
There are a couple of reasons for this.
One, many small businesses running on shoestring budgets simply don’t have the money to invest in the latest software and hardware. And two, the people running these businesses don’t think using newer technology will make any significant difference. The old computers are working just fine, after all!
Yes, the best technology doesn’t come on the cheap, but the return on investment is great. Technology will make your business more efficient and productive.
Create a budget for business digitization and hire IT experts to help you find the right tech solutions for your business needs.
Avoid the Challenges Growing Businesses Encounter
Seeing a business start growing is a dream come true for entrepreneurs. However, growing businesses aren’t on steady feet just yet. If anything, this is when they’re most likely to crash.
As the article has demonstrated, there are many challenges standing in the way of a growing company. These challenges aren’t impossible to overcome. As long as you’re equipped with the right tools, you can beat these obstacles and steer your company to great success.
Best of luck and keep tabs on our blog for more business tips.