Yes, growth is a good thing. But high growth can easily overwhelm a small enterprise, and put it at risk of going under. Before you push your company toward an audacious sales goal, know the following:
- Understand your true operating costs. Know what they are and how they evolve as your business grows. Rapid growth will increase the cost of doing business and you need to be prepared.
- Get a solid grasp of your working capital needs. Understand how much cash your firm requires to conduct day-to-day business.
- Look at more than your income statement. It’s not the only index of health. To get a quick pulse of how your business is doing, you need to look at other metrics besides revenue. These include cash available, status of accounts receivable, inventory, and other metrics specific to your business.
Adapted from “Are You Growing Too Fast?” by Sandeep Dahiya.