900 N. Kings Highway, Cherry Hill, New Jersey 08034
856.667.4100 ·
215.563.0276 ·
Fax: 856.667.3652
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Business Tip |
Most businesses hope to grow. They consider themselves successful if
growth is taking place, and the faster the growth the better. Can too much business growth be bad for a company?
It can be if the growth is not adequately planned.
For example, an established company that doubles its sales volume in a year may find itself strapped for cash,
for working space, and for trained personnel.
For most established companies, a 12% to 15% annual growth rate would probably be manageable. The ideal growth
rate for your company depends on the unique circumstances in your firm and industry.
A new company (starting with zero sales) must obviously grow more rapidly than an established one. Some new businesses
may double their sales each year for the first five years or so before reaching the level where a 15% annual rate
is healthy.
Rapid growth often requires more inventory and more space. And it may require money to fund additional work-in-process
or accounts receivable. Who will fund the growth? A 15% growth rate can probably be funded by retained earnings.
A more rapid rate may require an injection of outside capital. If the owners can't provide the money, will it be
the suppliers (increasing the accounts payable) or a banker (new short-term debt)?
Every business should have a written business plan with its growth projections clearly identified. The plan should
include provisions for the finances, space, equipment, and personnel that such growth will require.
Your company's growth should be both workable and profitable.
Please contact us for assistance with your business planning.
