This is excellent news, and it highlights the rising hope that the national economy will soon recover to pre-pandemic levels.

However, while commercial and business growth is always welcome, it can also bring unique and difficult challenges to entrepreneurs. We’ll explore this further in the article below, while appraising the best ways to manage growth over an extended period of time.

What are the Stages of Business Growth

Before we delve into the best management strategies, it’s important to understand the core stages of commercial growth and how are they defined by their challenges?

  • Stage #1 – Existence: The first stage revolves around the existence of a new business, which is focused on building brand awareness and obtaining initial customers.
  • Stage #2 – Survival: By this stage, a business has proved itself to be a viable entity,  but it must find ways of growing organically, maintaining cash flow and optimising revenues.
  • Stage #3 – Success: This is a key period of growth for firms, as entrepreneurs must decide whether to exploit their previous accomplishments to expand further or simply consolidate their efforts and maintain steady profitability for a period.
  • Stage #4 – Take-Off: At this stage, rapid and exponential growth can occur, creating the need to reinvest more in the venture and potentially seek out viable financing solutions.
  • Stage #5 – Resource Maturity: At this time, your established business must consolidate its recurring financial gains while also striving to retain the advantages of smaller firms such as flexibility of response and agility.
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The Dangers of Business Growth and How to Manage Them

As we can see, each of these stages involves some type of growth and brings a wide range of risks and challenges, so let’s explore some of them in more detail and ask how you can manage them effectively:

#1. Working Capital and Sustaining Growth

As we’ve already touched on, the second stage of growth sees businesses tasked with survival as they deal with ongoing cash flow issues in most instances.

If you are faced with working capital shortfalls (which may be exacerbated by 60 or 90-day invoice terms), one potential option is to seek out invoice financing. This enables you to sell your accounts receivable at a slight discount, creating a short-term cycle of debt that’s immediately settled once the client pays the due amount.

This is an excellent way of safely and responsibly funding your business, without encumbering it with long-term debts.

#2. Indecision and Staff Turnover

When your venture is in the ‘success stage’ it often reaches a crossroads in terms of whether it pressed full-steam ahead or enters into a period of much-needed consolidation.

This can cause indecision within the business, creating a sustained lack of direction that may increase staff turnover and create a scenario where you lose ground to your rivals.

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So, it’s crucial that you have a clearly defined and agile business plan to cover different periods of time, so that you can measure your company’s recent growth and determine the best course of action at any given time.

At the same time, you may want to seek advice from a qualified management consultant, who can help to guide your response and inform your decision-making in real-time.

#3. Falling Profits and Squeezed Margins

If you do invest in growth as your business takes off, you’re likely to see your annual profits diminished as your margins are gradually squeezed.

If not managed carefully, this may cause issues with staff remuneration and the financial viability of the business, especially if you have to extend hours and pay significant amounts in overtime.

Ultimately, it’s crucial that even exponential growth and periods of reinvestment into the business are carefully planned, so that you can engage in detailed financial planning and maintain a balance between revenue and expenditure.

You may also have to distinguish between strategic and non-strategic tasks, with a view to prioritising your spending and ensuring that all company budgets are managed successfully.

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