All signs point to renewed growth among small businesses, according to a new report issued by the National Federation of Independent Businesses. Our last period of small business expansion illustrated to many entrepreneurs the double edged sword of growth. Although growth is generally considered a good thing for any business, entrepreneurs are often ill-prepared for the challenges that growth brings. Most business failures occur during periods of rapid growth.
Here are some of the key challenges that entrepreneurs face during growth:
1. The role of the business founder fundamentally changes during growth. They become less hands-on, and must focus instead on leadership, vision and managing the culture of the business.
2. The entrepreneur must build effective systems for their growing organization, including more sophisticated operating systems to replace knowledge that is simply walking around in people’s heads.
3. Management must be developed and recruited.
4. Communication can no longer simply flow through the entrepreneur. Communication systems need to be carefully developed over time.
5. Human resource practices must quickly evolve to assure the proper staff are hired for the right place and the right time. Care must be paid to employment law, as this is the most vulnerable area for litigation.
6. Forecasting cash needs and funding growth become critical. Mistakes in this area can be fatal for the business as it grows.
7. Financial reports must be developed that can help navigate the road ahead, and not just the road already passed.
8. Most entrepreneurs will one day exit their businesses. Decisions made during growth can affect exits that occur even many years in the future.