I had a great question put to me the other day.
You often hear of companies saying “our growth almost killed us” I know this from personal experience – why does this happen?
When businesses grow fast, pressure is put on all aspects of operations. Keeping up service delivery, the wheels fall off some projects, tons of people problems and, of course, financial issues – especially cash flow.
Always remember that most cash-flow problems are actually profit problems.
If we just look at the financial perspective of fast growth I think problems come down to people missing 2 important steps before they forecast their cash-flow.
Their cash-flow forecasting ends up being a wishful thinking budget rather than reality because they don’t first do a sales pipeline forecast.
Then, based on that pipeline, a profit & loss forecast, by month, out at least 6 months.
It’s obvious when you think about it that you need to be able to estimate how much cash is likely to come in, what you’re costs will probably be to service those sales, and cash to pay the rent and keep the lights on, but most people just base cash-flow on budgeted sales and costs. And I’ve never seen a bad budget.
These two forecasts can be hard work but anyone can do them. It just takes some discipline. And, like exercise, you feel great after you do it. Or at least better prepared for trouble.
One last thing, apart from staffing and cash-flow being a minefield, it can be a lonely being the boss and it’s critical to have someone to bounce things off. Get yourself an advisory board or mentor.
Thanks to Natasha Hawker at Employee Matters for the great question.