The question might appear almost redundant: what business wouldn’t benefit from growth? But while growth is the lifeblood of any company, it also brings significant challenges—particularly in the cash flow department. In fact, a growth phase can be particularly dangerous as it will involve heavy investment in the business, including the purchase of new stock and the hiring of new people before new customers pay. So how can you assess whether you’re stable enough for sudden business growth?

How strong is your management?

The skills to set up a new company are not necessarily those to lead it through a period of growth (though vision, tenacity and great negotiating skills will be crucial in both cases). Some entrepreneurs quickly discover that they need management support when the business starts to grow and moves from being a one-man-band to a corporation with a significant team. If you need help to lead the business, don’t be afraid to admit it.

Will the business dilute its corporate culture?

Every business has its own culture—its personality, if you like. When a small business becomes a medium-sized one, it’s easy for this culture to become diluted and for whatever made the company unique to evaporate. By becoming a generic business indistinguishable from your competitors you risk losing your original customer base, so make sure you remain true to your original vision.

Is the company seeking out customers or the other way round?

Most young companies invest heavily in marketing and business development. However, when they’ve built a reputation and attained a certain critical mass, the situation can reverse and customers can start seeking them out. This is a very positive sign that it’s time to grow.

Is the business plan panning out?

Chances are you had a clearly defined and costed business plan when you started out. If you’ve met or exceeded your targets and are amassing a reasonable level of profit, that’s another sign that you’re well placed to enter a business growth phase.

Is your financial forecasting up to scratch?

Unless you know whether your present revenue model is working, it’s impossible to know whether it’s scalable. It’s therefore crucial to measure your return on investment, so you know what funds to commit to business development activities—and of course, which activities—in the future.

Is your cash flow forecasting accurate?

In many ways, this is the big one. Even if you have a great service offering, a fantastic and scalable business plan, and customers clamoring to use your product or service, poor cash flow forecasting can hole your business below the waterline. In other words, it’s crucial to know when you will need to make rent, loan and utility payments, how much you will need to invest in new plant, people and raw materials, and when you will get paid by your new customers.

Can you assemble the team you need?

Any business is only as good as its people. In the early days, you were your business and probably performed most functions yourself, but that won’t be the case as your business grows. If you don’t already have the team you need to handle additional customers, will you be able to hire them or will you face serious skill shortages? Taking on new customers and not being able to service them to an acceptable standard will damage your reputation irreparably.

Can you get the finance you require?

To achieve business growth, you may need to borrow substantially, so it’s important to know your options. Banks have become far more cautious about lending since the financial crash of 2008, so it could be worthwhile talking to alternative lenders. With quite different criteria, alternative lenders can prove far more flexible and they can offer a number of innovative solutions, from asset-based finance (where you borrow against the value of your premises, plant or equipment) to invoice factoring and discounting (an excellent way to tame a troublesome cash flow, enabling you to borrow against the value of your invoices as soon as you issue them). You could even have an emergency loan inside your account within 24 hours if your cash flow projections go awry.

As can be seen, there are a number of factors that need to be borne in mind when pursuing business growth—but if everything is lining up, your company could be on its way to the big league.

Author: Carl Faulds is the managing director of Cashsolv. Carl offers advice and alternative finance support to overcome cash flow problems and identify possible underlying problems that can be addressed to ensure a positive future for your business.

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