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Managing Abrupt Small Business Expansion

Provided by SME Solutions Center - Kenya

Sudden Growth Spurt

As a progressive businessperson, you aspire for your business to experience sustained growth. Without a doubt, you would not mind substantial leaps in business performance. Take caution though; unexpected large rises in business performance could prove counterproductive. Without a proper business growth strategy, you may not reap the benefits of sudden business expansion.

Related Challenges

If your business, which normally serves 30 clients, suddenly acquires an additional 50 clients, you may be unable to handle the unexpected large client base. Other than exerting harmful pressure on existing monetary, physical, and manpower resources, sudden growth spurts can paradoxically cause a business to close down.

Overexploitation of Business Resources

The small business expansion may call for sudden increased deployment of existing hardware and manpower into business operations. Space requirements also increase. The urgent nature of such resource placement usually overtaxes resources.    

Eventual Business Shutdown   

Although you may institute temporary measures to handle the sudden growth experience, your business can only sustain the pressure to a certain point. You could secure emergency credit so as to carry on the abrupt growth course. Beyond that, things could begin to dangerously unravel. For example, you may run out of cash to purchase inventory and other crucial supplies. Consequently, your business could become unable to satisfy customer needs. What should otherwise be a positive development proves harmful. Being unable to sustain the increased size dynamics, you throw in the towel and close shop.          

Management Tips

You need to firmly get hold of any unexpected increases in business performance so as to ensure sustainability and to avoid closure. Three key suggested measures include:

  • Utilising lines of credit and credit cards
  • Having adequate equipment, floor space, and personnel
  • Avoiding long-term borrowing

Adequate Staff, Floor Space, and Equipment

Business resources are undoubtedly ‘eaten up’ by sudden growth. To avert possible grounding of operations, you need to make predictions about impeding growth so as to determine the quantities of additional resources needed.    

Using Lines of Credit and Credit Cards

Lines of credit and credit cards guarantee flexibility besides providing extra options. These financial facilities can at times help you to manage abrupt growth spurts.    

Avoid Long-Term Borrowing

Long-standing borrowing messes up your business’ debt to worth ratio, leading to a situation whereby the venture owes more than its assets’ worth. Consequently, the business will have over-depended on credit to fund its expansion drives. Such a business is unstable as its earnings are volatile. Other than pay up the debts, your business as well foots any related interest charged by creditors.  For this reason, long-term borrowing is not a desirable way of financing sudden growth. You should thus instead seek revolving credit facilities from banks. This strategy ensures that you settle the business’ expenses even when growth causes cash shortages.      

As contradictory as it may sound, speedy business expansion can pose serious problems to your small business. With proper foresight and planning coupled with speedy, accurate responses, you can however successfully go through sudden growth scenarios. These elements constitute a suitable business growth strategy. As the proprietor, you could make good use of credit facilities so as to effectively plug in cash shortfalls. If you maintain adequate hardware, personnel, and space resources through expedient planning, you will smoothly sail through abrupt growth phases. You could as well negotiate for revolving - as opposed to long-term - loan facilities with financial institutions so as to handle sudden growth situations.     

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