Often we look to external factors to help us determine whether we’re ready to expand and grow a business. Certainly, there are a lot of those to consider, from investor confidence, to customer satisfaction, to the size of our target markets and the growth potential offered by existing demand. Many small businesses find themselves in an excellent position in all of these respects, but somehow still have trouble maintaining stable growth.
These businesses may well be held back by internal limiting factors that need to be addressed before they’ll be able to grow further. Identifying and addressing these issues is key to enabling their continued growth, and to keep operations running in a stable manner in the long term.
Small businesses are very commonly forced to get creative to keep the lights on. This can come as a result of any of a variety of problems, whether it’s late payments, slow sales, loss of credit, or the loss of an investor. The compromises business owners are often forced to make can have serious secondary effects that interfere with the stable functioning of your business.
Passing the problem on to employees
Responding to a cash flow interruption by paying employees late, or by downsizing the number of employees and trying to eke more work out of too few employees is extremely destabilising. Workers who can’t rely on steady payment, or who regularly work a significant amount of overtime are going to suffer from stress and burnout. This will increase employee turnover rates, and reduce your ability to deliver a great customer experience.
Passing the problem on to clients
Businesses who prioritise their employees need to find another way to deal with a shortfall, and often that means delaying stock purchases and projects until they can be properly funded. This is also a poor solution, because it results in late delivery times and frustrated customers.
Instead of adapting their business to unreliable revenues, growing businesses need to stabilise their cash flow. That means setting up financing tools like business lines of credit, invoice financing, and financed payment plans that allow them to reduce late payments while also providing ways to deal with budget shortfalls in the near term.
Small businesses don’t require a lot of rigid structure, since teams tend to be small, and the chain of command short. If a unique situation arises, employees can simply consult superiors or coworkers and come up with a solution. More importantly, leaders can maintain oversight and keep every part of the business working together toward a common goal.
As a business grows, this becomes less feasible. Individual employees become less able to communicate well with those in other areas of the business, and middle managers might also begin to lose access to all parts of the organisation. This leads to miscommunication, and eventually unreliable performance for the business overall.
The solution to this problem is structure and bureaucracy. Exhaustive procedures and control mechanisms help to keep individuals, teams, and departments working together, even when frequent and direct communication is difficult to maintain across the organisation. Further, deeper and more elaborate hierarchies allow you increasing control over the flow of information between different areas of your business. Of course, these benefits come with their own trade-offs, as with any bureaucratic system, leaving it incumbent upon business owners to find a balance that works for them.
Businesses need to keep a close eye on suppliers to ensure that they aren’t forced to make compromises as they grow. If a supplier can’t grow along with their client business, that business may be forced to take on new suppliers to help them grow their operation. Having a diverse group of suppliers is great in terms of stabilising supply, but it can also cause major problems if goods from different suppliers aren’t fungible. This is particularly common for businesses that rely on unique or specialised products, such as specially farmed foods, hand-crafted goods, “local” products, etc…
Businesses that try to scale up, but aren’t able to maintain a consistent product, risk serious damage to their reputation. Before they can grow, they need to establish a stable supply that can accommodate their growth. This may require them to invest in their suppliers directly, or to change their growth strategy to pursue product diversity instead of emphasising their existing products.
Being aware of and tackling these internal issues is important for businesses of all sizes. By addressing them as soon as you can identify them, you can ensure that your business will be able to take full advantage of growth opportunities when investors come knocking on your door.