Is your company growing? Would you like it to grow? We tend to think of growth as a universally good thing, and while it is a good thing, it comes with its share of challenges.
Did you know that almost every growing company will run into cash flow shortages? Or even worse, limited cash flow; something that will greatly stunt your growth. Think about it – if you sell widgets and the demand for your widgets is growing, you need to buy the widgets or the materials to make your widgets to satisfy market demand. Sure, you can finance that purchase – to a point. I don’t know anyone that has unlimited credit, and eventually you’ll run up against that limit.
Say you’re a service company. You think you’re in the clear because you don’t have to purchase or make inventory? Think again. You need to hire more people to perform more services. This can actually cause a bigger cash flow shortage because it can cost more, and payment may be delayed even further.
The best way to avoid stunting your growth is to figure out how much cash you’re (likely) going to need and make arrangements in advance. Whether it’s a line of credit, terms with suppliers, or pre-payments and deposits on certain orders, there are ways to mitigate the cash crunches associated with growth so you can grow to be as big as you’d like.