Growing Pains

Almost all those in business would welcome growth. However, not managing it could cause growing pains. In reality, managing growth successfully requires thought and is really hard work.

Hiring employees rapidly might indicate that a business is growing. However, if the infrastructure to support the integration of these new employees in the company has not increased simultaneously, it could cause a painful situation for both management and the new employees. Unaccounted or unforeseen indirect costs, such as payroll taxes, benefits and insurance, could adversely impact cash flow. Rapid employment growth might also attract government scrutiny for compliance of labor regulations.

Rapid growth in sales orders is a great thing. Do you have the ability to deliver those orders on time and maintain quality? Do you have an adequate customer service function to handle potential issues?

Fast growth in revenues creates an increase in receivables (unless you are fortunate to have a cash-only business). Do you have sufficient working capital or access to funds to accommodate such an increase or even delays in collections?

While growth is desirable, Entrepreneurs need to manage it carefully to avoid or significantly mitigate the accompanying pains.

Ravi Patel

www.patefCFOservices.com

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