What is your number one business goal this year? If you are like most entrepreneurs, you’ll probably say that you want to grow your business faster. This is a commendable goal, but it shouldn’t be your sole focus. Instead, you should focus on profitable growth.
Surprisingly, rapid growth actually increases the risk of failure. Businesses that can’t manage their growth wisely often develop cash flow problems, resort to sales strategies that damage their long-term brand identity or expand into unprofitable markets.
Here are some tips to ensure the sustainability of your growing business.
Focus on cash flow
According to a study from US Bank, approximately 82% of all business failures are caused by cash flow mistakes. Cash flow problems are actually more common with rapidly growing businesses for a couple of reasons:
- They are often more likely to offer services on credit, but fail to improve their accounts receivable conversion period.
- Expenses rise as the business grows. They may have difficulty managing expenses carefully, which can deflate their profit margin, because the revenue might not rise as much as expenses do. At such times, for a short period of time, it is recommended to have a line of credit to help go through the hard times.
- They may expand into new territories or products where they have limited experience without doing their due diligence. If they lose too much money in these markets, they may have to cut growth in more profitable segments.
You must always keep a very close eye on all of your financial metrics. A digital wallet like Due.com can help with that, plus helping you streamline your cashflow. You must also segment your financial statements by geography, product, customer demographic and other variables. This helps identify any areas where you’re losing money, so you can make adjustments to maintain adequate cash flow.
Choose the right partners
Choosing the right business partner is one of the most important decisions you’ll ever make. Don’t choose a business partner just because you are good friends or can enjoy a drink together.
You need a business partner that has the skill sets you need to thrive. Identify the skills you lack and look for a partner that fills the void. If you are the technology genius, then you probably need a partner that has a financial or sales background.
Danny Wong also states that you must find a business partner that shares your enthusiasm. Some of his early partners didn’t share this dream, so their ventures weren’t sustainable.
Make user experience your number one goal
There is a price for prioritizing the acceleration your sales trajectories too much -the satisfaction of your existing customers may suffer. You must provide an excellent user experience before focusing on expanding your customer base.
If you neglect to do this, your existing customers will eventually abandon you. You will also develop a reputation for providing poor quality solutions, which will make it much more difficult to convert new leads.
There are a number of ways to provide a better customer experience, including providing a more seamless website, optimizing your infrastructure through a CDN, offering great customer support and rolling our new solutions to automate various aspects of your delivery model.
Focus on solutions to real world problems
This is tied in with providing a good user experience, but needs to have its own section. It’s essential that you focus on providing solutions to real world problems your customers have, rather than features you believe are important.
A couple of years ago, I spoke with the young founder of a web technology company in Seattle. He said that he made the mistake of investing months of time and tens of thousands of dollars developing several software applications. After they were complete, he approached prospective customers and discovered they had no need for his solutions. His company filed for bankruptcy two months later.
What should he have done differently? He should have researched their needs ahead of time and made sure he was developing applications that would’ve solved their most pressing needs.
Don’t aim for the exit
Lots of entrepreneurs start businesses with the intention of selling them off. It’s easy to understand why, since many brands have earned millions by merging with conglomerates like Facebook and Google. Instagram sold out to Facebook for over $700 million in 2012.
The problem is that if you focus on building a business that you can sell off, you may not run it properly. You may cut too many corners in the development stage or failed to maintain decent cash flow to keep it sustainable. If your business goes bankrupt or fails to deliver a valuable solution, you’ll never have the chance to participate in a merger. It’s why you need to keep your eye on the ball and run the business like it will be your baby for the next 20 years.
Ryan Kh is an experienced blogger, digital content, and social marketer. He is founder of Catalyst For Business and contributor to search giants like Yahoo Finance, MSN. He is passionate on covering topics like big data, business intelligence, startups and entrepreneurship. Connect with him on Twitter @ryankhgb.