Responding to rapid growth

Rapid growth happens when your business sales volume and turnover increases suddenly, sometimes without warning. You may have pursued rapid growth as part of your business strategy, or it may have occurred because of a trend or high demand for a specific product or service you offer.

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Rapid growth has many benefits to the business, but it also comes with challenges including:

  • lack of systems in place to support the growth
  • not having enough staff to help manage increased sales
  • not having the cash flow to purchase products to meet demand
  • uncertainty around the stability or duration of growth.

To help prepare your business for rapid growth, you can:

  • develop a rapid-growth strategy as part of your business plan
  • monitor industry trends and changes
  • forecast and predict market movements.

Being prepared can help your business thrive through rapid growth.

Causes of rapid growth

Rapid growth can happen for several reasons, including the following:

  • Your product or service may become very popular with consumers (e.g. a celebrity or influencer wears or uses it).
  • Your brand becomes trusted and known in the marketplace after a long period of modest growth (e.g. recommendations from your current clients build momentum).
  • Your new or innovative products were first only purchased by early adopters, and now general consumers are buying it (e.g. a new technology becomes more mainstream).
  • Your major competitors can't continue production or they close suddenly (e.g. because of supply-chain issues, an incident at the premises or warehouse, or they move offshore).
  • You create an innovation that fulfills a new market niche (e.g. you design and manufacture a product that solves a sustainability issue).
  • You win a large contract or tender.

Each of these reasons will have its implications for managing growth. But you should identify the challenges you could face and develop strategies to implement before and during the growth phase to maximise your business opportunities.

Rapid growth example

A trending product you stock is currently unavailable because an order was not placed to replenish your stock.

This causes some damage to your brand reputation as your customers experience long wait times for the product.

How will you manage your business reputation and the demand for the product?

If your business is not prepared for rapid growth, opportunities could be missed leading to business failure, reputation damage or a decline in sales.

Continue reading for strategies and sources of support to help you manage rapid growth.

Responding to cash-flow shortfalls

A major challenge with rapid growth is cash flow. To manage rapid growth, you may need:

  • more staff to fulfill orders and provide customer service
  • specialist staff to run production and deliver services (e.g. engineers, installers, IT developers)
  • more raw materials or components
  • increased stock
  • larger warehouse, more equipment and other facilities
  • more legal and accounting services
  • more managers to handle operations, production and staffing (e.g. general manager, operations manager, human resources manager).

But you may not have the capital you need to cover the increased expenses until your payments from customers come in.

Preventing a cash-flow shortfall is the best strategy and this starts with planning your business requirements and sourcing them early (e.g. debtor finance and lines of credit can be in place well before the rapid expansion).

Learn about cash-flow management and how to fund your business growth.

The following lists cash flow strategies and examples, and when they may be useful.

An example of pre-sales orders is when you have sold out of your products and need time to make more. You would need to ask for pre-payments and state the likely wait time.

This strategy is viable when your business has a good reputation and sound financial management.

Conversely, you may be tempted to use the pre-payments instead for general cash needs in the business—this may help your operations but it does not deliver the products customers are expecting.

The pre-payments should be kept aside, preferably in a separate bank account and only used to produce the customer orders.

It can be difficult to predict your future sales, but this strategy is useful if the loan is for an asset that could be sold (e.g. warehouse, equipment, more delivery vans).

This strategy is useful to provide cash flow for various needs. Once set up, it can be used quickly to cover cash flow for short periods.

This strategy is useful to build stronger cash flow by improving the speed at which money works through your business.

Where your terms have been set and customers are late paying, request all due payments.

Given some value incentives (e.g. price deduction or additional products for free) to encourage customers to pay quickly or on time.

New customers should be placed on terms that will keep the cash flowing faster.

This strategy is useful as a short-term cash solution. Generally, 80% of the value of the customer invoice is paid to you by the bank or other financial provider within 24 hours.

The provider then collects the debt from the customer when it is due and takes a service fee.

Read about cash flow, invoices and payments.

This strategy is useful when there is strong demand for your products or services. You may also be undercharging compared to the market.

Give current customers warning of price increases and why (e.g. you are providing more support, better features).

Your rapid growth may be around one type of product and other product lines may no longer be as valuable. This strategy is useful if you have assets that you do not need and can sell (e.g. machinery and equipment).

Leasing or hiring equipment rather than purchasing it may allow for more manageable cash flow.

This strategy is useful if you have enough personal assets to support you through a period.

But it could also have a negative effect on your motivation and mental health, which you will need to manage.

This strategy is useful when you can delay ordering or renegotiate when you pay expenses.

You can negotiate delays of pay rises with staff if you can ensure future benefits for staff. But delaying a promised pay increase can also lead to lower staff motivation and potential loss of staff.

Renegotiating or outsourcing other expenses (e.g. IT) may also be beneficial.

Map out rapid growth in your business plan

Update your business plan, and sales and finance forecasts, to plan for rapid growth.

Use our business plan template and refer to Part 7, Financial plan—in particular, cash-flow forecast and business goals.

How to respond to staff and skill shortages

Staffing is a common challenge during rapid growth and you will likely need to recruit for new positions to keep up with the demand and increased operations.

A skills-needs analysis is the first step in deciding who you need on the team and what roles and tasks they will fulfill. Talk to your small business mentor and advisers for advice on workforce planning.

You should make sure that all new positions match carefully prepared job descriptions. Detailed and accurate job descriptions are needed to build a successful and skilled team within your business.

Rapid growth tests your ability to deal with increasing customer numbers and their needs within the time available. You will need to ensure you have enough staff for:

Recruitment and managing staff support

There are many sources of support to help you with recruiting and managing staff, including:

You may choose to outsource some functions and operations, or hire experienced management personnel on a short-term or long-term basis to help support you during the growth period.

Your own role is also likely to change during this period. If you are usually involved in the operations, you may need to move into strategic planning and set up an advisory board to help you.

You may also need to consider getting more training or mentoring to support you and the business. Read about:

Don't neglect your mental health

Rapid growth can bring many challenges for you and your staff as the business changes. Support is available at:

Expanding to new premises

Rapid growth may force your business to move to new premises, but relocating is disruptive and may involve extra expenses and new equipment.

You also need to identify if the growth is long term or only temporary, so you should consider what space is required for a new premises and for how long.

Make sure to do your due diligence when deciding on a location and lease terms. You should also consider if the business could expand further and determine if a prospective premises will be large enough to accommodate it.

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