Unplanned for Growth can Kill a Business

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The Small Business Administration still swears most businesses fail in the first five years. I am still swearing by the idea that this is usually a lack of planning. The planning, more than likely, leaves out expansion.

Let's look at a few examples. Anyone remember what it was like trying to use America Online in the mid and late 90's? You had to hope you were in an area with quite a few phone lines. Otherwise, it could take quite awhile to log on. This almost did in AOL for awhile. This was before the days of cable and DSL connections. AOL and other providers didn't have an inkling as to how to get over this hump.

I have heard rumors that Google is having trouble because its infrastructure is weak. Those hired to carry on all their new structures are struggling to keep up. It's really surprising nothing akin to this happened to Microsoft in the early years. Bill Gates happened to be talented at getting the work done elsewhere.

Here are ways to help you get a better footing for a growth spurt.

People peck at business plans. Some avoid them all together. While others, just let the subject drop after they get busy. Business plans need to be reevaluated periodically. Do you see a big increase in sales on the horizon? There was a good commercial a few months about a small furniture company. The accountant comes running in to the room asking the head guy to "Look at these numbers." The account is overwhelmed, "...if this keeps us; we'll need..." The head guy's answer is: "Wasn't that the idea?" That dear reader sums it up. If that owner hadn't planned what he was gong to do when his business came to this milestone, he would have been more flabbergasted than the accountant.

I know the part where you are suppose to project numbers into the future. Hard to do before you get there, but you have to do the best you can with what you see happening in the market. The next step is outline what kind of financing you will to need to meet this head on.
The time to go out for financing for expansion is not when the customers are banging on the doors and demanding to know where their orders are. If you plan correctly, sales projections and financing, you will be ready when the time comes.

My definition of being ready is an entrepreneur who finds a way to put funds from his own pocket, relatives and friends, into the business account before he opens the door. He has a business plan open on the computer for scanning at least once a week. He has already proved himself in the business world to the credit folks in general. When time for expansion is at the door, there will be someone ready to hand him a loan.

Infrastructure is also a key issue. Basically, do you have good people that are going to finish the orders coming in the door? If you run a big Internet company and have promised there will be an earth shattering application revealed at the next tech show, did you hire the programmers who will get the job done?

When growth comes, and it's unexpected, that's the problem. You will need to know beforehand how you will expand your labor pool. If you write this into your business plan, then it will only be a small issue.

When I was starting my own public relations firm, my expanded labor pool included members of a writers' professional group along with my teenagers. The other writers came in when I needed copy written and research. The kids did mailings. If things had gotten any busier, I would have gone to the nearby college for an intern. If you specialize in an area, it is always helpful to be a member of a group(s) who share the same talent.

Also, be careful that you don't limit your growth with the structure you give your new business. I had a friend who designed specialized software for small companies. He had to come running whenever there was a problem. The only way to bring in more cash he felt was to offer warranty policies. The only problem was that he would have to hire someone else to take the service calls. He didn't want to do that. I also heard of a bakery owner who blindly only hired non union drivers. They were only allowed to drive within city limits. He didn't have a clue that his business was stuck in a rut.

You may also need additional capital equipment if you expand beyond your current equipment's production capabilities. If you are producing widgets, or planning on it, best to figure out your peak production capabilities before you get there. That way, you can save for the expense.

If you look back over all the points I made, you will realize that they have one component in common. They all require planning. Good planning is the way to keep growth from doing you in.

Laura Bell is Freelance Writer and owner of www.bellbusinessreport.com. The Bell Business Report offers common sense business advice and how-to info for running your business. It takes the everyday headlines apart, dealing with business news, and shows you how to put that information to work for you.

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