Some small businesses want to stay small. Some businesses want to grow. Here are five growth challenges small businesses may be facing: (1) changing regulation, (2) founder dependence, (3) becoming overwhelmed by growth, (4) customer service failures, and (5) cash flow issues. Small business owners can overcome these growth challenges.
Changing regulations are a part of everyday life. Take for example a change in EPA regulations that effectively eliminated pollution from chain saws. Although this law is probably embraced by almost everybody, the change could have an effect on the growth of a chain saw retail business. Because of the change in this regulation, chain saws have become unreliable (due to the intense heat used to burn off VOCs) and have a higher failure rate. A chain saw retailer may lose business from regular customers who are used to getting robust equipment that doesn’t fail so easily. The customer could find a different vendor. Providing warranty work could reduce the impact of this challenge.
Founder dependence is another challenge to growing an entrepreneurial business. Some founders are reluctant to delegate or teach the trade to employees. This lack of knowledge transfer requires the founder to be present at all times and to essentially make all of the business decisions. Businesses that are dependent on the founder have growth challenges because there are time constraints (168 hours per week) and physical limitations on the founder (because everybody must sleep). The business can grow only to the maximum that the founder can produce. Delegating could eliminate this challenge.
Business growth in an entrepreneurial firm can also become overwhelming. When growth is fast, there may be a sense of overwhelm by getting buried in new work orders and inundated with work in progress. In this scenario, business growth is challenged by more customer orders, more customer demands, more inventory required, more and better systems, more employees, etc. This could create a sense of being defeated by growth. Managed, predictable, stable growth is preferred. Just ask any successful entrepreneur. Hiring the right employee could eliminate this challenge
Customer service failures can be challenging for a growing business. In rapid growth, customer contact is less frequent, customer demands are greater, and lead times become longer. Longer lead times are a customer service failure if your customers are used to getting product in a short period of time and now it takes longer. Better planning and scheduling could overcome this challenge.
Cash flow management becomes important in a growth business. You may have heard of business growing pains. I believe this phrase comes from the challenges of having more cash out-flow than cash in-flow in a growth period. Cash outflow comes from more wages by employees working more hours, more inventory to build the product, more utilities used due to longer working hours, more insurance due to more working hours, more of almost every expense, all before collecting any money for the product being produced. Longer trade terms and rapid collection of accounts receivables could eliminate this challenge.
Business growth is good, if that is what you want. Managed, planned, steady growth is better.
Paul J. Werner is a highly trained and experienced marketing professional. He is a teacher at heart, and has taught many college marketing classes. Paul has many years experience in small business ownership and entrepreneurial marketing. He and his wife currently own U.P. Marketing Department. You can receive a free marketing analysis by clicking here.