Every business is in business to grow. No one starts a company and thinks, “I sure hope this stays small and continues to struggle!”
But growing rapidly doesn’t always match the way we picture it when we’re daydreaming about our success. Finding a sustainable growth rate is what makes helps keep your dreams from turning into nightmares.
In this post, we’ll explore how businesses typically grow along with what can happen when they grow too fast.
Typical Business Growth
A typical organization’s growth pattern starts off high then levels off as the company ages.
When a new startup first enters the market, it is introduced to a new audience. Their growth is often explosive since the business is starting from “zero.”
As time goes on, and that company gets more established within its particular market segment growth usually levels off to a range where it is increasing year-over-year but nowhere near the rate that it was at the beginning.
Since all good things must come to an end, there is eventually a point where companies slow down, get bought out, or close their doors for one reason or another. Towards the end of a business whose time has come, the growth rate drops closer to “zero” again. (And if it has been experiencing long periods of negative growth, the writing is most certainly on the wall.)
McKinsey & Company, a leading strategy and corporate finance advisory firm, studied the 5,000 largest companies worldwide looking back over the past 15 years. They found that 2.8% growth was the average in the 10 years before COVID-19 (2000-2020), and only 1 in 10 realized growth above 10%. (Their “10 Rules of Growth” is worth reading to see how companies that bucked the trend managed to do it.)
For most companies, a healthy growth rate hovers somewhere between 2-5% annually. That’s a pace that puts them above the overall growth of the national economy without stressing their resources. They are generating more revenue each year than the one before, and the owners are able to keep the company running smoothly.
If a company experiences growth in the neighborhood of 15%, it is considered to be rapidly growing. While that may sound like a dream come true for most small business owners, it can present a whole new range of challenges.
Signs a Company Is Growing Too Fast
Here are a few things to look for to know whether or not your company is growing too fast:
1. Do your employees seem overly stressed and unhappy?
Recently, we’ve discussed how to keep good employees happy in order to avoid high turnover and unhappy customers. If you notice that the overall culture of your company has shifted in a negative direction, it could be that they are overworked by trying to keep up with rapid growth. Any of us can work longer hours and “put our nose to the grindstone” for a short period of time, but no one can keep that pace indefinitely. Your employees are a great way to gauge the health of your growth.
2. Is the quality of the product/service you deliver getting worse?
This is often a natural result of overworked employees with too much to do and insufficient time to do it. When we get in a hurry, quality suffers. If your people are rushing to move products out the door or keep up with the demands of more customers, they’re much more likely to make mistakes and deliver results that are less than what you’re used to.
3. Are your resources being stretched too far?
Your employees and product quality are two “resources” that you should be able to easily assess to see if they’re being stretched too thin. But as an accounting firm, one of the first things we notice when clients come to us for help in growing their business is when their revenue is good, but they consistently struggle to keep enough cash on hand to cover their expenses. When financial resources are under stress, even though the business is growing, it could be one of the signs a company is growing too fast.
4. Have new ideas stopped flowing?
When you’re in a season of rapid growth, there are days when it’s all you and your team can do to keep up. Like we mentioned earlier, that’s ok for a season. But if it becomes the norm, there isn’t any time available for you or your leaders to work on developing new ideas that can move your company forward. Innovation is important so that you don’t become stagnant in your industry. So if no one is coming up with anything new, it could be because you’re not able to sustain your current level of growth.
What Happens When a Business Grows Too Fast
Inc.com lists “5 Ways Growing Too Fast Will Destroy Your Company” that you should definitely take a look at (after you finish this post, of course). These things can suffer when a business grows too fast:
- Your processes. As you grow, make sure you are constantly evaluating how you do business to ensure that you are always able to deliver quality results for your customers. Look for ways to streamline or automate routine functions so your team can focus on the nuanced areas of what you do. And as Elizabeth says, “don’t over-promise and under-deliver.”
- Your culture. Hopefully, your plan is for your business (and its great employees) to be around for a long time. So it’s worth making sure you don’t lose the culture that makes your company great along the way. Make sure you take time to focus on your team. Also, as we’ve written before in “7 Recruiting Best Practices to Help You Hire Great People,” the worst thing you can do is rush the hiring process.
- Your customer service. Emphasize the importance of outstanding customer service to your team often. Look to companies like Zappos and Chick-fil-A for examples of people who do it well on a large scale, and learn from them. Give your customers plenty of ways to interact with your company, and be sure to respond quickly to each and every contact. Even if you can’t resolve a question right away, just letting them know you’ve heard them goes a long way.
- Your employee retention. When things get busy during seasons of rapid growth, a lot of workers tend to leave. Maybe they feel like they’re having to work too much, or perhaps your company culture (see #2) has changed to the point that they no longer fit in. Whatever the reason, you can’t afford to lose valuable employees.
If this is a situation you’re facing, take a look at the post we did on “How Employee Engagement and Retention Goals Can Make Your Business Even Better.” We think it will help stop the revolving door.
- Your physical space. As you add more employees or expand your operations to be able to do more work, you’ll quickly find yourself running out of room. Before you start knocking out walls or shopping for new property, make sure you’re using the space you have efficiently. Rearranging a few things or finding new ways to use what you have could buy you valuable time as you focus on growing and serving your customers.
Avoid These 9 Common (and Costly) Accounting Mistakes
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We Can Help With Business Growth
Now that you know what to look for, be sure the people you partner with understand how important it is to grow the right way.
In West Tennessee (Jackson, Dyersburg, Brownsville, Martin…and now Blue Oval City), we’ve been helping all kinds of small businesses grow for over 4 decades! Find out what our team can do for you…hint: it’s a lot more than taxes! Schedule a call today!