Yes I know it sounds silly, a problem we should all suffer from, you think, too rapid growth, we say ” I would love to have that problem,  I will solve that when I get there”.

Hopefully you will get there ….surviving long enough to get there, let alone solving the problem, as too rapid growth is as deadly as inadequate growth. You can learn to live on less, you can choke on to much.

Here are some issues you could encounter:

Remember most of us work on net thirty to forty five day terms from date of invoice. It many instances some receivables are stretched to 60-90 days. Just as frequently our vendors are usually clambering for payment in net thirty or sooner, maybe COD or prepayment making matters even worse.

As we all know payday comes every Friday no matter what and payroll taxes must be deducted and isolated from the general cash flow. Other overhead requirement are monthly payables that cannot be ignored either.

So here is the point, with accounts receivable collections typically being thirty to sixty days old, account payable pressure demanding payment as soon as possible or you risk getting shut off, payroll and payroll taxes are do weekly and cost of work in process is increasing rapidly to satisfy increased demand from rapid growth and the system breaks.

We begin to fail to pay the vendors and they slow down on shipment or refuse to ship at all. We must pay payroll which is also increasing  dramatically, way before we receive the growth revenue, and thus we begin to stop paying the 941 payroll taxes, or other necessary overhead expenses such as advertising and insurance, other payables not required for survival operations.

You can begin to see what happens…implosion. Death from too much, too rapid growth and insufficient capital to support the development. Some v

Another offshoot of rapid growth is the vendor supplying  a key component or service will eventually shut you off bringing production or service to an end.

Rapid increase of payroll is the tendency to begin growing in anticipation of needs, thus middle management is developed, managers and assistant managers are added, stores, offices, warehouses, manufacturing facilities are beefed up in anticipation of need and the payroll as well as the benefits and taxes can choke you before the revenue arrives.

I DOESN’T WORK.

A third issue is the tendency to discount, and reduce the profit margin to attract or purchase an additional share of market and thus without profit, growth is impossible as where will the extra capital come from to support the growth and development costs? Yet we launch discount programs and spend ourselves into oblivion in anticipation of additional profits which will never arrive. We forget its not gross revenue but is profitability that runs our engines.

Advertising and marketing is typically expanded and can be quite expensive without assurances there will be a return for the investment. A dangerous additional expense that can help spend you into a downturn.

The opposite is just as true, as soon as cash flow begins to tighten, advertising, and marketing are the first to be cut as deemed unnecessary components, easily dispensable, until sales begins to drop and its more expensive and difficult to recapture the lost share.

Loss of focus. Rapid growth can become an addiction with growth itself being the goal. Keeping your primary mission in focus and serving the best needs within your growth plan is a safe plan.

Growth for the sake of growth alone, believing anything will work is extremely dangerous and likely to result in waste of capital and future closings.

Rapid growth that stresses your system t a breaking pint will force bad decisions in many arrears as you try to solve problems by starting new ones.

The answer, projected, carefully planned growth with adequate capital to support the plan and controlled development based on success and developing profitability. Better yet finance the growth plan with outside new capital and then with a well designed careful implementation of your mission enjoy controlled growth based on additional investment not additional profit.

However you finance your growth plan, you must know where you are going and how you are going to get there and stay within the parameters determined safe and secure as per your new projected cash flow pro-forma. Grow only as fast as your cash plan allows and follow the carefully crafted mission meticulously.

This works. Rapid growth, out of control, is the fastest path to disaster imaginable. If it happens you will be closed without an opportunity to correct the path. Too rapid growth is a killer. Call for help 413-549-2966.