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How to manage spikes of growth without risking your business

Spikes of business growth can happen at any time. Sometimes, they result from careful planning and other times, they arise unexpectedly and take you by surprise.

However they come about, sudden spikes of business growth can put your business at risk. How can you manage rapid growth and still stay stable? These tips will help.

Invest in human resources

Embassy Powdered Metals grew from a $4 million to $16 million company in just three years after Alan Ramsey, Steve Aharrah, and two other partners purchased the company in 2013. The rapid growth was no accident. Ramsey and his partners had been brought on board to help turn around the business, which makes components from metal powder for the home and automotive industries, after a slump following the recession of 2008. The new leadership obtained ISO certification in just three months, which made the company more appealing to a wide variety of prospects.

To keep pace with increased demand, Embassy Powdered Metal put more than $7 million into purchasing new equipment, training employees, and acquiring a nearby competitor. The company also doubled its staff to 96 employees and expects to add about 40 more in the next five years. Investing in training for the new employees was key to maximizing productivity of the company’s machinery, and Ramsey says there is a lot more untapped potential.

Do your market research

Growing markets change quickly, so it’s important to stay on top of trends in your industry and market. This is especially true in industries with slim profit margins, such as solar power. Grape Solar project executive Jack Caruso says “staying vigilant” was vital to the company’s success as it grew by 700% between launch in 2009 and 2012. With a steady stream of new manufacturers, distributors, and retailers, as well as new technology, entering the solar power marketplace, getting customer input is one way the company ensures sustained demand for its products.

Follow Grape Solar’s lead and talk to your customers. Gather and review data about their purchasing patterns. Keep an eye on what your competitors are doing, too. Based on this information, revise your business plan and update your strategy to keep pace with your growth.

Develop and nurture supplier relationships

Suppliers are key to keeping the costs of rapid growth from spiraling out of control. Maintaining good relationships with your suppliers helps you get the best possible terms. “Terms are huge for us,” says Caruso, noting that Grape Solar’s retail customers typically have a net 30. Because the company draws from a limited pool of high-quality silicon suppliers, it can be a delicate balancing act to negotiate the best terms and prices while competing with bigger manufacturers. “You have to develop pipelines to get terms that help you with your cash flow,” Caruso says.

Cultivate a strong management team

As your business undergoes rapid growth, you’ll need to step back from day-to-day management of some areas to focus on the big picture. That requires delegating to trusted managers. Do you have them?

Entrepreneurs are often leery of handing off any duties to others, but if you try to control every aspect of a rapidly growing business the way you did in your startup days, you will create a bottleneck that hinders business growth. Instead, take the time to hire wisely, train employees thoroughly, and model the kind of company culture you want to see. Then you’ll be in good shape to divest some duties during spikes of business growth.

Take the long view

When business opportunities pop up, it’s tempting to grab at the brass ring—but before you do, stop and assess whether pursuing them aligns with your overall business mission, vision, and goals. An opportunity that looks great in the short term might throw your business permanently off track.

Also, consider how the cost of new opportunities will affect your business financially. Will pursuing a new market or developing a new product siphon money from your core business? As new competitors and technologies enter the market, Grape Solar founder Ocean Yuan’s years of experience in the solar industry have helped the company keep its sights on the big picture.

Manage your cash flow, debt and credit wisely

The better you can control your cash flow, the more you can reduce risk during spikes of business growth. Take advantage of trade credit whenever you can, paying on time so your credit score and supplier relationships don’t suffer.

Slow payments from customers can put a major crimp in your cash flow, as you have to ramp up to fill their orders before they ever pay you. “Conventional working capital financing, such as a standard revolving line of credit, are very inefficient for fast-growth businesses,” says Kevin Ehinger, vice president of market operations at C2FO. “When you’re growing dramatically, you’re funding next month’s business with this month’s money.” Accelerating payments with C2FO can help rapidly growing businesses get the capital they need when they need it.

Embassy Powdered Metals’ customer Leggett & Platt suggested the company use C2FO’s accelerated payments solution, which Ramsey likes because it’s easy to use and understand.

Grape Solar uses C2FO to get advances on payments and free up cash to buy silicon inventory whenever they find a good price. “C2FO is a dependable way [we] can leverage current sales to get an advance,” Caruso says.

Successfully running a business during rapid spikes of growth is like steering a speedboat through turbulent waters — both exhilarating and scary. By following the growth rules above, your business can win the race without capsizing.