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When a company\u2019s leadership engages in strategic planning, growing the business is typically at the top of the agenda. This is as it should be \u2014 ambition is part and parcel of being a successful business owner. What\u2019s more, in many industries, failing to grow could leave the company at the mercy of competitors.<\/p>\n
However, unbridled growth can be a dangerous thing. A business that expands too quickly can soon run out of working capital. And the very leaders who pushed the business to grow beyond its means might find themselves spread too thin and burned\u00a0out.<\/p>\n
That\u2019s why, as your company lays out its strategic plans for the coming year(s), it\u2019s important to focus on manageable<\/em> growth.<\/p>\n A common scenario<\/strong><\/p>\n Among the biggest challenges that many \u201chigh-growth\u201d businesses face is finding enough financing for their expansion plans. Their owners often think, \u201cIf we want to double sales, we\u2019ve got to double assets.\u201d Buying equipment, hardware, software, raw materials and other assets usually requires debt or equity financing \u2014 which can be good for a lender but perilous for a borrower.<\/p>\n Overzealous asset acquisition strategies can cause repayment problems if cash flow projections fall short. There\u2019s often a delay between:<\/p>\n The faster the growth, the bigger the gap. Businesses typically fund the shortfall with a credit line. And as they take on more and more debt, loan repayments can eventually consume most or even all the company\u2019s cash\u00a0flows.<\/p>\n Warning signs<\/strong><\/p>\n It\u2019s easy to get swept up in the whirlwind of rapid growth, but it\u2019s not inevitable. You and your leadership team can watch for common warning signs that you may be at risk of becoming a victim of your own success. These include:<\/p>\n An increasing debt-to-equity ratio.<\/strong> High-growth businesses tend to burn through cash at an alarming rate, if given the opportunity. If your strategic plan will likely drive you to consume an entire credit line, and then ask for more, watch out. Closely monitor your ratio of debt to equity. A consistent upward trend is cause for concern \u2014 even if it\u2019s within loan restrictions.<\/p>\n Quickly declining profit margins.<\/strong> Leadership teams overly obsessed with growth tend to focus on the top line and lose sight of expenses. Low prices and an undisciplined approach to taking on any and every customer can further erode\u00a0profits.<\/p>\n Rising complaints.<\/strong> High-growth companies are often inclined to overlook quality control and fall short on backend obligations, such as warranties and customer service. This typically leads to customer complaints. Meanwhile, cash shortfalls may lead to delayed payments to vendors and lenders. At some point, these parties will likely start complaining as\u00a0well.<\/p>\n Do the managing<\/strong><\/p>\n Make no mistake: growing your business is an important and, in many cases, necessary goal. But if you don\u2019t manage that growth, it could manage you \u2014 into a crisis. Contact us for help building reasonable financial objectives into your strategic planning process.<\/p>\n \u00a9 2022<\/em><\/p>\n <\/body> When a company\u2019s leadership engages in strategic planning, growing the business is typically at the top of the agenda. This is as it should be \u2014 ambition is part and parcel of being a successful business owner. What\u2019s more, in many industries, failing to grow could leave the company at the mercy of competitors. However, […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7,14,10],"tags":[8,11,12],"class_list":["post-16375","post","type-post","status-publish","format-standard","hentry","category-articles","category-business","category-news","tag-articles","tag-news","tag-updates"],"_links":{"self":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/16375","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/comments?post=16375"}],"version-history":[{"count":1,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/16375\/revisions"}],"predecessor-version":[{"id":16376,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/16375\/revisions\/16376"}],"wp:attachment":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/media?parent=16375"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/categories?post=16375"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/tags?post=16375"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n
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