Managing a Small Business
Managing Growth - Streetwise Tips

Streetwise Tips on Managing Growth

* Establish credit lines that grow
Whenever possible, try to establish credit lines that will grow along with the business. For example, in setting up a credit line with your bank, try to get a credit line based on a percentage of your receivables, rather than a constant, static amount. Chances are your credit line will be reviewed by your bank annually and will be subject to ceilings and restrictions, but try to build as much flexibility into your borrowing relationships as you can. This will leave you better equipped to finance fast growth. Also try to establish credit lines with your trade suppliers that grow along with your business as well.

* Add systems and procedures
As your business grows, you won’t be able to spend as much time personally checking over details as you did initially. So, set up systems and procedures that will help you be sure that management and staff are continually making checks in the same manner you would have. Maybe, for example, you need to set specific product quality control standards. Or maybe you need to set up purchasing procedures. The more your day-to-day business operations rely on systems and procedures, the more growth you will be able to effectively achieve.

* Watch nonfinancial limits
Because money, or rather the lack of it, is such an overwhelming impediment to growth, it is easy to overlook other issues that may limit your ability to grow. You might feel that some people on your staff, your computer system, your facilities, or some other component of your business is being overtaxed by continuous growth. If so, don’t hesitate to slow down the pace of growth for a while until you feel that that component of your operations is running smoothly again. It takes a wise, disciplined manager to hold back on unbridled growth to ensure that the company can continue to deliver quality products in a professional manner.

* Use ROI criteria to determine which investments to pursue

Because a fast-growing business often has more profitable options to pursue than it has money, a decision must be made as to which options should be pursued. One way to determine which options offer the best opportunities for success is to select those with the highest return on investment (ROI). A simplified example is that of a store trying to decide which of two different product lines with equal profit margins to carry. Using ROI criteria, the store may decide to carry the product line that sells faster because its money or investment will be tied up for a shorter period of time, giving a higher return on the investment.