Do you think your business is growing too rapidly? Here’s the warning signs

A startup's early stages and growth cycle are not easy. A company that survives the early stages and starts growing is still vulnerable to failure within the first two years. Fast-growing startups face some unique challenges, which can ultimately lead to failure.

Are you experiencing too much growth in your business?

Research indicates that 20% of startups fail within the first 12 months. When your startup enters its second year, you might feel safe, but that's far from the truth. Now is the time for growth.

You may need to slow down your startup's growth!

It's not a bad problem to have, but if left unchecked, it can cause major damage to your business.

When your startup is growing too quickly, there are some red flags that will become evident. Here are some of the most warning signs you should watch out for.

1. It lacks quality

It is always a good idea to keep an eye on quality control. During high growth periods, this is especially important. When things get busy, you don't want to dilute your service or product by offering a lower quality.

It's important to get feedback from your customers during these times and you'll be warned if something isn't right early on. If you don't manage quality, you could be letting your customers down by delivering inconsistent products and services.

2. Issues related to cash flow

The problem of persistent cash flow is one of the most obvious signs that your startup is experiencing unsustainable growth. Your startup's services and products may be in high demand, but its cashflow isn't keeping up.

Here are some cashflow issues you could face:

• Invoices that have not been paid. In high demand, unpaid invoices can pile up, affecting your working capital and leaving your business in a vulnerable state.

• Failure to pay suppliers on time. Your startup's financial health could be compromised if you regularly fail to pay suppliers. In particular, if you wait until invoices are paid before paying them.

As a result of these issues, it's likely that your business has poor cash flow and has grown beyond its means.

3. The growth plan isn't aligned to current business

When a business grows too quickly, focusing on growth goals can sometimes take a back seat. In times of really high growth and demand for services, time and resources can naturally be diverted to just getting through each day. Too long can cause the growth plan to become irrelevant, and it should be revised. To ensure the business is steered in the right direction, management needs to ensure the team has enough bandwidth to handle the volume of business.

4. Hiring the wrong team

In the early stages of a startup, the team you put together makes all the difference. A handful of people working together to navigate a dynamic and challenging time. Then growth occurs and more people are needed.

You won't have HR colleagues on board when you start expanding the team, and maybe even a hiring policy won't exist yet. Interviewing and hiring talent may be the responsibility of one person, who may not be seasoned in this area.

Poor hiring choices are a sign that your business is growing too quickly. Taking on people just because they're available rather than because they're qualified for the job.

5. Operational inefficiency

In order to meet the demands of a rapidly growing business, your operational processes must also grow. When demand starts to scale, a small team of superstars may juggle responsibilities and get things done 'by any means'.

Having operational processes that cannot handle an increased volume of business is a sign that your business has grown too fast. Your team might not be large enough, or perhaps your workflow and processes need to be revised.

If you see these red flags in your business, you're probably growing too fast. The first step is to identify the problem. Once you have identified the problems in your startup, you can take steps to rectify them.

As with any startup, the goal is to eventually grow your business rapidly, but the key is not to begin this process before your underlying business is ready. It is possible to end up being your downfall if you expand your business too quickly. Your startup will succeed if you pay attention to these warning signs.

Hello, we’re Zyla Accountants - the perfect solution for your financial, accounting and bookkeeping requirements. 

Book a call with us, our experienced team will be happy to support you and your business grow.

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