The curves we draw to represent the growth of a business are misleading — in fact they are flat out wrong. They usually show smooth curves with revenues meeting expenses at break-even, then swooping us toward the heavens leaving ever growing profits in their wake.
The truth is that growth is a messy thing. It never follows a smooth path. The real curves that signify growth are jagged. Growth is lumpy, not smooth.
Growth requires us to make leaps of faith as we commit to significant new overhead, including more space, more equipment and more staff. With every new commitment to overhead, our break-even point increases accordingly. If we are growing fast in the early development of the business, this means that our point of break-even cash flow keeps getting pushed further into the future. Even if we have reached profitability, these new overhead commitments can quickly turn a business in the black to a business that is in the red.
Growth can stoke the flames of the burn rate that consumes our precious cash.
Growth in a business is good. It is a sign of that the market agrees with our dreams and our plans.
And in today’s dynamic economy, a growing business is like the shark — it has to keep moving forward, or it will drown.
The commitment to growth requires careful thought and careful planning. Never grow simply on faith and hope. Grow with a careful plan that tells you what challenges your decision to grow will create. Understand all of the chain reactions that growth creates for more space, more equipment, more parking, more computers, more people, more customers, and more cash.
Make your growth intentional. Some of our growth is, in fact, quite controllable. Never let your market completely dictate your growth. Sometimes pass up opportunity for the health of your business. Leave time for your business to adjust to its new level of operation — allow time for your business to “digest” its latest growth. This gives time for your cash flow and your systems to catch up to the higher level of activity.
Growth can be the best thing that happens to a business or the worst thing that happens. The more you understand how growth will impact your business and the more you take control of that growth, the better chance you will to make it through the two stages of any period of growth. You must first survive each growth spurt before you can thrive on that growth.
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