I’ve been told by my accountant and banker that my business is growing too fast and that that’s dangerous. I don’t see the dangers of that! Is success something dangerous?
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This is the irony in business, actually there’s nothing wrong with your success, but sometimes when it happens too fast it can vanish as quickly as it came and that’s what your accountant and banker are afraid of. If grow stops, or decreases what will you do? Your business is not showing steadiness, get it? |
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if you grow an infrastructure to match an uncertain customer base, you could be in trouble. can you farm out some of the work instead of adding more people and office space? then if the business goes away, you're not stuck wondering whether you need to do a round of layoffs and move back into your parents garage. |
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as stumbles mentioned, the danger lies in growing the infrastructure along with your business. You should be careful to not assume that future growth will continue at the current pace. too much investment into fixed assets is bad when business is not as good as you expected. |
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Ben and stumbles answers are good. I would add that one of the key infrastructure issues is generally customer service, which is hard to scale effectively and fast degradation of your customer service can quickly turn your growth into and a downturn. More important is your cash flow. How long is your sales cycle? If it is too long and your Cost of Goods Sold (COGS) has to be paid up front you may find yourself in a position that you simply cannot accept new business. For example if you are B2B, it takes 30 days to manufacture a widget (whatever you make), your terms of payment are 30 days, and you have to pay manufacturing costs up front, well then you have a 60 day cash flow hole before each new sale generates revenue. Multiply this by the nuumber of new orders and you could have a serious problem. Other issues: Supply chain issues (i.e. unreliable vendors who can't keep up with your growth), poor hiring decisions (because you have to scale up quickly), the list goes on and on. But hey...your business is growing! Raise your price and slow down growth if you can't handle it! |
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