Challenges Faced when Companies move from Small Companies to Medium or Large Companies

In every business operation the key most important objective is business growth, but whilst a high rate of growth is almost every business owner’s dream, it can prove to be a nightmare and take the business under if not properly managed. Growth requires preparation and planning and as s result organizations can plan for scaled growth which includes a timeline and milestones to achieve along the way. This will ensure that stakeholders as the company grows are able to meet the increased demands and accommodate the changes. 

It is a norm that businesses often underestimate the intense pressure that comes with rapid growth.

Cash Flow Crunch 

One of the most significant challenges faced by fast-growing organizations is cash flow, this because as the business grows it will have to deal with increased demand for the company’s products or services. At this point the business may be surviving mainly on credit as the business tries to grow sales and revenues. However, pushing of higher sales may result in monthly expenses that might actually exceed revenues that is monthly expenses exceed the companies operating capital 

So as to manage your cash carefully during these times, a business should turn to other channels that produce consistent sales and work to maximize their contributions to your bottom line whilst pushing other sales for rapidly growing markets or aspects of the business. The business can also negotiate favorable payment terms with partners and vendors too.

Leadership

Initially when the business is still small the owner or the brains behind the business tends to be hands on, on all the business activities but as the company grows it will be impossible for them the same level of control of all the activities and there might be need for delegation of duties.

Not only does rapid growth of a business affect the owner of the business, it also affects the leadership team the owner will be working with as they might struggle with managing their increased workload whilst devoting time and energy to the long-term planning needed to keep the business growth on track.

A leader should learn when to delegate and when to get involved this is because there are times when a business owner needs to get personally involved in specific decisions such as strategic planning, However there will be need to delegate some of the duties to managers and trust that they can make the best decisions and perform their work to the best of their capabilities.  

Customer Service 

When a business is still small its customer services will be quite good as they can afford to have one on one relation with their clients which can develop repeat business. As the company grows and have a lot of customers it will not be able to keep the same type of relation and might affect their customer relation. Negative feedback is more likely to increase as business expands rapidly this is an indication that the business is not able to cope with markets expectations in terms of delivery, lack of personnel to manage clients interactions or employees maybe be cutting corners to meet customer demands 

The business should consider hiring a number of people in the customer service department that will be able to try and cater for most of the client’s requests. The company can create and monitor a feedback system regularly and have a plan in place to monitor both positive and negative feedback

Company Culture

Every organization has different cultures and ways of doing business and different communication strategies and as the business is still starting up, the owner is a bit hands on in most of operations and business decision making. The communication line is horizontal at this stage with less line managers.

As the company grows there will be need for more line managers resulting in vertical communication. 

The business should also strive to ensure that some of its organizational culture is preserved and stay true to their beliefs and main goals but should keep room for adjustments when necessary so as to adapt to the changes being experienced by the business  

 Operational inefficiency

Uncontrolled expansion will cost your company time, money and other resources, this is because when the business starts growing at a fast rate than anticipated the company will be forced to improvise to manage the increased demand for the product or service. The company wont be able to adhere to perfect business plan where operations is smooth, pressured to hire more people sooner than anticipated and maybe be forced to redesign work flow so that it can accommodate increased demand .

While higher demand mainly leads to economies of scale this might be not the case as if rapid growth is experienced, it may result in any of these problems and other:

  • New employees who  are poorly trained and not yet up to speed with the business operations and are prone to errors which can be costly to the business at this stage
  • Manufacturing or buying inventory cannot be done quickly enough to fill orders as suppliers might have not adjusted or the business will still be looking for supplies who can provide the large amount of quantity 
  • Diminishing customer service 

Employees are overworked, putting in long hours and getting ready to jump ship.

A vibrant workplace inspires employees to work their hardest, but when work consumes most of their waking hours, you run the risk of losing your trained and trusted employees. You may find that your business is a revolving door of employees in spite of generous compensation and benefits.

Pay attention to the evolving workplace culture as your business grows. Find the time to discuss quality of life issues during staff meetings. Make sure to address personnel matters as needed, but do it expeditiously.

Infrastructure and Logistics

Rapid expansion of a business brings with it a new level of complexity, and will need robust systems to manage it. As your small business grows, so does demand for your products and services. Expansion which happens rapidly can create challenges with order fulfilment and put enormous pressure on business infrastructure example office space, as more time and resources are required to keep your operations running smoothly. 

The need may arise to invest in tools such as Accounting Systems , Payroll , planning , CRM and time management system.

Quotes 

1. Felix Lluberes, President and Co-Founder of Position Logic

“The biggest challenge is keeping your family happy and constantly deciding when to miss important family events because work demands it. Working hard is not a sacrifice as long as you achieve your ultimate objective.”

2.  Larry O’Connor, Founder and CEO of Other World Computing

“As our organization grows, a key objective for me is to recruit the talent we need to grow and to ensure we have the right programs and benefits to not only retain this talent, but enable them to perform at their best. The things we can control are the easy part; what takes up time are the changes we have no control over. For example, recent government programs and policies, such as the Affordable Care Act, are requiring us to restructure our current programs to ensure we are in alignment.”

3. Dean Parker, Founder of Callis

“The top challenge faced by fast-growing companies is balancing the use of capital with hiring the right talent at the right time. It is a balancing act that an entrepreneur must get right in order to build a highly successful business, not only in profit, but also in culture.”

4. Josh Phillips, President at Pyxl

“Balancing the needs of the business — growth, cash flow, new opportunities — with employees’ needs is the biggest challenge we face. Working with younger employees has presented a whole new set of challenges and opportunities that go back to having a culture of growth that everyone buys into. We are focused on bridging those areas and creating a sustainable business model.”

5. Barg Upender, Founder and CEO of Mobomo

“Our team is growing fast. We are struggling with setting up career tracks for development teams, project/account managers, and sales/marketing teams, and we are trying to set up controls and metrics to run all projects profitably.”

6. Andrew Field, President and CEO of PrintingForLess.com

“When you have a month of 20 percent year-over-year growth, you are scrambling. It’s challenging to get away from the day-to-day tasks and activities and concentrate on the big picture and strategy for future growth.”

7. Matt Grebil, Entrepreneurial Wrangler of Three Twins Ice Cream

“Company culture is generally formed fairly early on by founding members and key management personnel. These individuals work very closely together, making it relatively easy to maintain company culture. But as you start to add new personalities (not to mention additional locations), it can become a real challenge to assimilate all of these individuals and maintain the company culture.”

8.  Tom Sullivan, CEO and President of SoundConnect

“Getting the right people on the bus is hard. I’m picky, but I think that is a good thing. If you don’t have enough of the right people, then you will try to do everything yourself. Startup leaders wear too many hats, and it can prevent you from meeting your goals and growing your company like you should be.”

9. Mark Miller, Vice President of Marketing at Emergenetics International

“As a fast-growing company, the biggest challenge we face is capacity. We have increasingly been able to build our demand, but ensuring we have the right people to execute on this demand is really tough. There are brilliant potential employees, but truly understanding what kind of hires we need and how to get people up and running quickly, effectively, and productively is our biggest challenge.”

10. Vinny Antonio, President of Victory Marketing Agency

“Cash flow management for a rapidly growing, bootstrapped company can be harder than the world’s most difficult Sudoku puzzle. It’s almost a full-time job staying on top of who owes you what and who you owe, and then prioritizing those payments. All the while, you’re pushing for more growth, but with that comes additional expenses — most notably, your executive team. Good talent doesn’t come cheap, and you often have to find creative ways to lure the right personnel to your team.”

11. Gopi Mandela, President and CEO of Remote Tiger, Inc.

“When founders of companies are experiencing fast growth, it is easy to get entrenched in the daily grind and lose track of the big picture. The challenge lies in building the right management team so you can stop playing the contextual role of a COO and start being a CEO.”

12. Todd Palmer, Owner and President of Diversified Industrial Staffing

“The biggest challenge faced by fast-growing companies is a lack of employees with the skill sets needed to continue to drive revenue. The public school system in America is failing miserably to build the next generation of working professionals at a rate to match businesses’ needs. Combine this lack of homegrown talent with the visa challenges to bring in skilled talent from outside the U.S., and American small businesses are battling for talent on a daily basis.”

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