A lack of growth is rarely listed as a reason for the failure of small- and medium-sized businesses. Rather, one of the most common causes of business failure is too much growth! It might sound counterintuitive – but it is a fact.
The keys to long-term business success lie in both identifying a sustainable rate of growth for your business and understanding that there is always a cost to growth, which must be financed from somewhere.
A sustainable rate of growth is one which your financial, physical and human resources can service. This may mean rejecting some opportunities now, however, I can assure you that any notional loss on those opportunities is nothing compared to the damage to your business from taking on new clients and then failing to deliver.
The cost of growth in a financial planning practice arises in two areas: increased recurrent expenditures such as staff costs, occupancy costs, administration costs and marketing and promotion costs and capital expenditures such as investments in systems and processes, building and equipment etc.
These costs are inevitable and you must plan as accurately as you can for them. Work out how much they will be and crucially when they will be incurred. Numerous businesses get themselves in trouble due to a mismatch between the time when cash comes in and the time when it must be paid out.
