Rapid growth can occur for many reasons, such as unexpected market opportunities or a successful growth strategy.
As the name suggests, rapid growth happens fast, and brings with it a host of challenges, such as hiring more staff, investing in new premises or infrastructure, or increasing production capacity.
Issues that can arise from rapid growth without proper planning include cashflow issues (you may need to increase borrowing to finance it), customer service challenges, and other operational inefficiencies stemming from the sudden increase in business.
The good news is a strong finance function is the not-so-secret weapon to help businesses navigate rapid growth and stay in control of rapidly changing business finances.
Data driven decision making
For any company, but especially those experiencing rapid growth, data is paramount. As important as the data itself, however, is how it is interpreted and deployed as part of a wider business strategy.
Robust management accounts translate raw numbers into user-friendly information that can be applied to your wider growth strategy, giving you crucial insight into business performance at every level.
Perhaps your rapid growth is predicated on a recent change in pricing strategy. Maybe you have introduced a new product or penetrated a new market which has proven a game changer.
This insight can be gained through your management accounts, allowing you to respond effectively and incorporate this data into your wider business decision making.
Define your growth KPIs
With masses of data, it’s very important to establish which data is most important. This is where KPIs come in. When it comes to rapid growth, it is essential that the most attention is placed on the most important metrics.
Without closely monitoring KPIs, a business runs the risk of missing opportunities or key weaknesses, which may arise as a result of the growth it is experiencing.
Understand where the growth comes from
When businesses experience rapid growth, it may not be immediately obvious what the trigger for this growth has been. Perhaps your pricing strategy has positioned you better than your competitors, or perhaps a recent marketing investment has paid dividends.
Management accounts give you a clear financial view of your business and allow you to pinpoint which areas are driving growth, in addition to which areas are making a loss. They also help you plan effectively for the future, thus ensuring you do not over-reach and put your business at risk.
Communicating rapid growth to investors
Growth is good news for investors, that much seems obvious, and being able to accurately communicate why growth is happening will help increase investor confidence even further. Rapid growth can be volatile, however, and investors are likely to be sensitive to risks this may bring with it.
Rapid growth, when not properly planned, can spiral out of control – investors know this. By properly communicating your plans, with the help of management accounts and financial data, you can assure your investors that your growth is robust and sustainable.
Seek advice to help navigate rapid growth
If your business is experiencing rapid growth, then you are doing something right. This is an exciting time for any business, but one that brings several potential risks.
When it comes to navigating rapid growth, management accounting can do a lot of the heavy lifting for you, freeing up senior management’s time for planning and executing your strategy. A CFO can also help build a future strategy and execute on this plan.
The Genus team has a wealth of experience in delivering meaningful information, insightful advice and integrated planning for all business types. For finance support tailored to the specifics of your business, speak to Genus today.