What to do when the phone won't stop ringing

Last time, we talked about how to turn things around when faced with a business downturn. As difficult as that situation is, it is almost as challenging when a business is faced with just the opposite condition - when business is on a major upswing and it must be able to accommodate significant growth in a short period of time.

Although this is a nice problem to have, small businesses need to be careful about managing growth.

What goes first

When a business finds itself inundated with more orders than it can handle, often one of two things happen. They either start turning down business or accepting all orders knowing they can't possibly fill them.

Business should never be turned down without attempting to negotiate terms that may be favorable to the customer. This may come in the form of a price break, delayed payment schedule, or discount on the next order in return for the customer accepting delivery of your product at a date later than they would ordinarily want. Even if you are unable to work something out, you are still building goodwill for potential customers that could carry over to tangible business in the future.

Accepting all orders without informing customers of realistic delivery dates is also not a good idea. There is nothing more irritating than going to a crowded restaurant, being told the wait is only five minutes, and then waiting half an hour. For customers that depend on their orders being filled on time, the ramifications of a late order can be very costly, and they will be much less inclined to come to you in the future.

What goes next

Small businesses that are growing rapidly usually lose management control next. This is because they often need to evolve from a very small to a not so small type of organization.

An owner who was formerly the president, accountant, marketing rep, and principal worker now will need to delegate much of those responsibilities in order to accommodate the growth in the company. This can be a very difficult situation for owners who have a "hands-on" mentality and aren't used to managing people.

Managing growth

The key to managing growth is to set realistic goals based on the strengths and weaknesses of the owners. And since the owners are the ones who are going to be making the major decisions that affect the growth of the company, they need to realistically assess their own strengths and weaknesses. If the principal in a growing company is good at marketing, he or she must be willing to acknowledge that and hire people who can manage other key areas of the company, such as finances, human resources, manufacturing, and administration.

Setting realistic goals can be accomplished once the owners surround themselves with the right people and are able to answer some important growth-related questions, such as:

• Is the demand for my product only in local markets, or could it be there for regional, national, or international markets?

• How much will I need to manufacture of my product in order to bring costs down significantly, and what risks do I have to take if I can't sell them all?

• Should I use franchising in order to expand quickly?

• Are there other products that I should be selling that are logical complementary products to the ones I already sell?

• Should I try to find debt or equity financing to fund the growth of my company?

Small businesses often stay small or fail because they weren't able to manage growth. It is certainly not a given that every small business must continually grow in order to be successful. In fact, many small businesses would fail if they attempted to expand because their market demand was small.

What is important is that small business owners are always aware of their opportunities to grow and are ready to take the appropriate action.