I recently attended an ANZ seminar on Business Growth put on by Stephen Caulter, and one of the questions posed to the group was "If your business is growing should you be worried?". Very good question Stephen.
The answer if you are not sure is Yes, you should be worried. It's great that your business is growing and it's exciting because it is a time of great potential. But if you are not careful you are in danger of quickly running out of money and losing control of your business.
This is happening with a lot of trades and related industries at the moment. Here are some of the warning signs that show you are heading into danger.....
Losing Control - Business is really busy, it's exciting but the problem is, now all you do is put out fires and you are anxious about where the next one is going to come from. You are working longer and longer hours. You used to know how much money you had in the bank, who owed you money, what your staff were doing, who your customers were, and you had high quality standards. Now you are so busy that you don't have time to even think about these things any more - you have lost control.
Customers not paying on time - Invoicing is not being completed until long after the job is finished and no one is chasing old outstanding invoices.
Bank relationship is getting strained - You are going over your overdraft far too often, and the bank doesn't want to lend you any more money.
Suppliers not happy - The amounts you owe your suppliers just keep getting larger. Previously your supplier was happy with you being a few months overdue, but now they want you current on your account and are putting limits on how big the account can get. It doesn't seem to matter how hard you try to keep current, it isn't happening and it is starting to affect your business in a big way.
Stock accumulating - As your sales increase, in most cases you will need more stock to keep ensure that your customers have what they want when they want it. Employees are buying product ahead of time. You look around your business and see stock accumulating in all sorts of places.
More staff but less efficient - You have more staff now and you are finding that they don't seem to be getting much more done than when you had less staff. (Chances are your instincts are correct.)
Quality control - There are far too many jobs not being completed to your previous standards, customer complaints are increasing and you are spending way too much time going back to correct old jobs.
Too many of the wrong kind of customers - Some of you may be thinking "Daniel I have been following you so far, but this sounds a little crazy - I know some of my new customers are a pain - but more customers can only be a good thing. Right?"
Let's look at a example. A plumber may be very good at working in well with small building companies. He has a good ad in the yellow pages online and as his industry gets busier, he is now getting a lot of small one-off jobs from individuals that take between 1-3 hours each to complete. However by the time his employees travel to these jobs, work out what is needed and then do the job, he finds they can only bill out the full hourly rate of billable hours for 4 out of the 8 hours per day. By comparison with the builders he can get 7 out of 8 hours charged that day. If he is honest, on some of those smaller jobs he is losing money or at best breaking even. So if he grows with these smaller jobs, he either has to become really efficient or will be losing money. In effect doing twice the work for half the profit.
If you are growing it is essential that you have a good plan for growth that addresses these problems. If you do not, it won't be long before you run out of money. If you are seeing some of these signs in your business then do something now before it's too late.
The answer if you are not sure is Yes, you should be worried. It's great that your business is growing and it's exciting because it is a time of great potential. But if you are not careful you are in danger of quickly running out of money and losing control of your business.
This is happening with a lot of trades and related industries at the moment. Here are some of the warning signs that show you are heading into danger.....
Losing Control - Business is really busy, it's exciting but the problem is, now all you do is put out fires and you are anxious about where the next one is going to come from. You are working longer and longer hours. You used to know how much money you had in the bank, who owed you money, what your staff were doing, who your customers were, and you had high quality standards. Now you are so busy that you don't have time to even think about these things any more - you have lost control.
Customers not paying on time - Invoicing is not being completed until long after the job is finished and no one is chasing old outstanding invoices.
Bank relationship is getting strained - You are going over your overdraft far too often, and the bank doesn't want to lend you any more money.
Suppliers not happy - The amounts you owe your suppliers just keep getting larger. Previously your supplier was happy with you being a few months overdue, but now they want you current on your account and are putting limits on how big the account can get. It doesn't seem to matter how hard you try to keep current, it isn't happening and it is starting to affect your business in a big way.
Stock accumulating - As your sales increase, in most cases you will need more stock to keep ensure that your customers have what they want when they want it. Employees are buying product ahead of time. You look around your business and see stock accumulating in all sorts of places.
More staff but less efficient - You have more staff now and you are finding that they don't seem to be getting much more done than when you had less staff. (Chances are your instincts are correct.)
Quality control - There are far too many jobs not being completed to your previous standards, customer complaints are increasing and you are spending way too much time going back to correct old jobs.
Too many of the wrong kind of customers - Some of you may be thinking "Daniel I have been following you so far, but this sounds a little crazy - I know some of my new customers are a pain - but more customers can only be a good thing. Right?"
Let's look at a example. A plumber may be very good at working in well with small building companies. He has a good ad in the yellow pages online and as his industry gets busier, he is now getting a lot of small one-off jobs from individuals that take between 1-3 hours each to complete. However by the time his employees travel to these jobs, work out what is needed and then do the job, he finds they can only bill out the full hourly rate of billable hours for 4 out of the 8 hours per day. By comparison with the builders he can get 7 out of 8 hours charged that day. If he is honest, on some of those smaller jobs he is losing money or at best breaking even. So if he grows with these smaller jobs, he either has to become really efficient or will be losing money. In effect doing twice the work for half the profit.
If you are growing it is essential that you have a good plan for growth that addresses these problems. If you do not, it won't be long before you run out of money. If you are seeing some of these signs in your business then do something now before it's too late.
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