How to Tell if Your Business Is Growing Too Quickly (and What to Do About It)

15 signs your business is growing too quickly

Here are 15 indications that your business is growing too fast, along with ways to address those issues.

1. Cash flow is insufficient.

One of the biggest red flags surrounding growth pace is that cash flow dries up even when business is good. Cash flow management issues typically occur because a business collects smaller payments while incurring new, more significant expenses.

“As you grow, you are spending money to perform on increased demand and volume while collecting on receivables from the lower-volume period that just passed,” said John Torrens, a professor of entrepreneurial practice at Syracuse University’s Whitman School of Management.  

The problem occurs when inflows don’t match outflows. “If a business did not plan for this by building cash in advance of a growth stage, then this can create stress on the organization,” Torrens cautioned.

What to do about insufficient cash flow

Ideally, plan for cash flow problems before they happen. Saving cash in a growth reserve fund can preserve the liquidity you’ll need when you jump to the next level and your expenses rise. As always, it’s wise to overestimate expenses and underestimate revenue. This way, when projections are off, you have a margin of error within which to operate.

If you’ve failed to maintain enough liquidity and can’t increase cash flow quickly, don’t worry. Most cash flow problems associated with rapid growth result from money being tied up in accounts receivable. If you’re willing to spend a bit off the top, an invoice factoring company will loan you a large percentage of your outstanding balances while actively pursuing collections. This frees up working capital for your business and removes the burden of following up with unpaid accounts so your staff can focus on quality service instead of on debt collection.

2. Employee morale is declining.

As a business scales, workplace dynamics can change significantly. Although an increased workload can contribute to employee stress, other factors can hurt employee morale and reduce productivity, including the following: 

• Wages have remained static when the business has performed well.
• Employees’ efforts haven’t been recognized. 
• The working environment has changed. 

Whereas business owners and executives may welcome rapid growth, heavy workloads and high stress can demoralize employees. Some employees may even resent their leadership team and consider leaving the business.

What to do about declining employee morale

A successful business requires happy, engaged employees. Increasing compensation is an obvious solution to bolster morale as your business experiences rapid growth. However, this may not be possible amid cash flow issues. 

If you can’t give raises or offer discretionary bonuses yet, consider providing creative perks and finding other ways to boost morale, including the following: 

• Recognize employees’ contributions publicly.
• Offer flextime to help employees manage their work-life balance.
• Expand your paid-time-off (PTO) policy.
• Provide employee mental health services. 

3. Customer service standards are falling. 

A sudden uptick in customer service complaints could indicate your business has grown too quickly. With more clients and the same number of employees, it can be challenging for your staff to continue giving each customer the same level of attention. Employee burnout and fatigue could also lead to more mistakes and dissatisfied customers.

“Our first signs that we were growing too quickly were simple things, such as not returning prospects’ emails and calls as quickly, or not being able to take inbound calls as needed,” said Matt Schmidt, owner of Diabetes Life Solutions. “I woke up one day and knew we had to bring on new people to address the demands of the public.”

What to do about a customer service quality drop

When the quality of the customer experience drops, you have two choices: hire more people or take on less work. Naturally, hiring more people is an attractive option, but if you’ve run into cash flow issues, you’ll need to rectify those problems first. Nobody wants to turn down more work, but if paring back growth to gain stability ensures your company’s long-term success, it could be a sensible decision.

4. Leadership is reactive, not proactive.

When a business grows too quickly, pressing tasks begin piling up. This backlog can cause management to be reactive instead of proactive and strategic. Although it’s essential to manage the day-to-day workflow, it’s also crucial to plan for the future.

If growth outpaces planning and leadership is in disarray, these factors can exacerbate the other problems caused by scaling too quickly.

“One of the problems I have witnessed when companies grow too fast is that top leadership and management struggle so much to keep up with ‘I need it yesterday’ demands that they stop paying attention to the long-term planning and creative development that fueled the company’s growth in the first place,” said Frankie Russo, founder of Russo Capital.

What to do about a lack of proactive leadership

Managers and leaders must ensure delegated tasks are completed promptly, but they can’t get bogged down in minutiae. Trust your employees to complete the work you’ve assigned them, and consider using project management software and workflow automation solutions to boost efficiency. 

The management team should continue gathering specifically for forward-looking meetings. This way, even when the day-to-day workflow is hectic and the demand to follow up on incomplete tasks is great, decision-makers can carve out time to think about where the business should go and how they will take it there.

5. Employee performance standards drop.

Quick growth can lead to a rapid increase in individual workloads. When this happens, many employees may not have enough time to do their job properly. They may miss deadlines, come to meetings unprepared and make mistakes. When employees are overstretched and overwhelmed, team and individual productivity and performance quality will plummet. 

What to do if employee performance standards drop

Hiring more people and automating tedious workflows can help prevent employee burnout and boost performance standards. For example, investing in one of the best customer relationship management (CRM) software platforms can help streamline processes and relieve overburdened team members.

However, before you implement these solutions, determine the extent of your business’s quality issues. Evaluate where team members aren’t performing to the required standards, and quantify the work you must redistribute or automate. 

6. You’re relying on old systems and processes, and they’re failing. 

The processes you relied on earlier in your business’s development may have worked fine at one point. However, they won’t be suitable as your company grows. For example, various teams and departments may have used their own apps and databases early on, but as your company grows, you’ll find that siloed departments derail communication and collaboration. Without proper communication, the left hand has no idea what the right hand is doing. And if there’s no centralized data management, the problems become much worse.

Relying on old systems and processes is a recipe for inefficiency, errors and missed opportunities, all of which will hurt business growth.

What to do if the old ways are holding you back

If rapid growth reveals cracks in your processes, it’s time to invest in predictable and controlled solutions for the entire operation. For example, customized CRM or enterprise resource planning (ERP) software will allow you to build standardized workflows for managing and completing specific tasks. Colleagues across the organization can collaborate and track their workloads and projects, while managers gain greater visibility into individual and team performance.

Importantly, CRM and ERP software will deliver a centralized database, thus improving the performance of sales and customer service teams and enhancing organizational collaboration and decision-making. 

7. An inefficient middle management structure is impeding progress. 

When a company scales too quickly, it may reflexively create a middle management layer between the C suite and on-the-ground leaders such as sales managers, customer care managers and dispatch managers. Middle management can be helpful and increase efficiency through shared knowledge and processes. However, it doesn’t always work out that way.

Here are some ways middle management can become a problem:

• Middle management fosters bureaucracy. Say you appoint a regional sales manager to unify sales strategies across the company, and instead, the opposite occurs: The middle manager filters, ignores or forgets ideas and excellent input from on-the-ground managers, thereby cutting off communication. This structure ends up stifling innovation and makes your business less agile and responsive to change.  
• Middle management responsibilities may be undefined. If a middle manager’s job responsibilities aren’t clear, bottlenecks and confusion in the decision-making process ensue. Nobody’s really sure who’s responsible for what. Middle managers may feel they’ve been tasked to deliver a specific result but lack the authority to get it.

What to do to sort out middle management

Inefficient middle management impedes many businesses, but it’s a solvable problem. Consider the following best practices to ensure your management structure supports your business’s growth:

• Create a culture of open collaboration. Establish a culture where everyone, no matter their level, can approach leadership. Consider implementing an agile team structure within your company’s management layers to improve internal decision-making and your ability to respond to change.
• Delineate middle managers’ job functions. Be clear about your middle managers’ job responsibilities. Ensure they understand their specific duties and their role’s purpose. Establish clear expectations, and provide regular feedback to ensure alignment with company goals.
• Promote the right people. Resist the temptation to promote managers according to tenure or loyalty. Just because someone served you well in a certain role at one stage of your company’s development does not necessarily mean they will serve you as well in another. 
• Train your managers. Regardless of whom you promote, plan and implement a rigorous training program to ensure all managers understand their roles and the requirements for effective decision-making. As you set and track key performance indicators (KPIs) for on-the-floor managers, set and monitor KPIs for your middle managers, too. 

8. You can’t fulfill your customers’ orders.

Not meeting customers’ expectations presents a real reputational risk to your company. For example, you may sell out of stock too quickly or hold on to customers’ cash for too long while you wait for a new shipment of stock to arrive.

You might be struggling to meet demand because you don’t have the cash to purchase the necessary inventory. The problem might be further compounded by a general inability to predict demand levels for particular products.

How to keep filling customer orders

Implement CRM and inventory management systems to analyze historical sales and market trend information and better anticipate product demand. These tools help you track stock levels and alert you when you must order inventory items. 

It’s also crucial to work closely with your suppliers and stay informed about stock deliveries. Timely payments will help ensure your orders are fulfilled and engender goodwill, potentially giving you leverage if you must ask for extended payment terms when cash flow is slow. 

9. Leaders make snap decisions about the company’s direction.

Business leaders often feel emboldened during expansion periods and become supremely confident in their ability to manage risk. This happens more than you might imagine.

With this mindset, senior management can be tempted to make snap decisions that diverge from previously agreed-upon plans. Changing direction midcourse or adding new projects on top of existing ones can create confusion among employees and delay the completion of ongoing projects.

How to stick to the plan 

To guard against poor decisions fueled by overconfidence, focus on the differences between gut instinct and hard data when you make business decisions. Establish a structured decision-making process that critically evaluates new opportunities or projects and determines whether they align with the business’s direction and goals. 

10. The customer’s voice becomes distant.

A growing company faces rising costs and cash flow pressures. As a result, senior management can become overly focused on revenue generation and forget the customer.

A singular drive to make money means you may not be as proactive in collecting customer opinions and insights. And if your workers feel pressured and are too focused on results, they may lose empathy for their customers, thus fostering disconnection and diminishing loyalty and brand affection. Customers who don’t feel heard will start looking elsewhere.

How to stay focused on your customers

Today’s CRM features include customer outreach tools that help foster connections. Your staff can get more done without compromising sales and customer care quality levels. For example, your CRM can help you gather survey data by automating customer surveys. It can also schedule direct interactions and provide customer-facing staff with personalized transaction histories so they can deliver more impactful solutions. 

11. Your staff has less time to innovate and be creative. 

When companies grow quickly, talented and creative staff members may have less time to innovate because they have much more work. They’re so busy focusing on the business’s current needs that they don’t have time to consider what would give it a competitive advantage tomorrow.

What to do about creative inertia

Your employees’ creativity may be the engine of your business’s future growth, so you must protect your investment in them.

Consider scheduling “innovation time” during the week when your creative professionals can develop new ideas without worrying about their other daily tasks. You could also look for ways to reduce pressure on them by passing some of their work to colleagues or automating certain tasks.

Make sure to listen to suggestions from everyone, not just from people in strategic or creative positions. Brilliant ideas can come from any team member.

10. Staff members are quitting. 

People who work at small companies are often more loyal than professionals in large businesses because their work is valued and they enjoy being part of a small, tight-knit team. They thrive on collaboration with co-workers and often feel a sense of purpose, involvement and importance.

However, if people are leaving your rapidly growing company, it’s a sure sign of a disconnect between your business and its broader mission.

What to do about high staff turnover

As your company grows, your employees must feel that they belong and that their contributions are vital. They want to feel like they’re part of the whole endeavor, not just a cog in the wheel of a department.

There are many ways to let your team know how vital they are to your company’s mission, including involving everyone in cross-departmental meetings, even if only occasionally. This inclusion helps your staff members understand how they fit into the broader business. They can also build better and stronger personal connections by taking part in interdepartmental team-building exercises and working with mentors.

13. Your managers aren’t delegating enough.

Managers often feel pressure from senior leadership during an expansion. They may be overwhelmed by their workload, unsure about their extra responsibilities, and uncertain about their ability to hit ambitious new targets.

In some cases, managers trust themselves more than their team and take on tasks they should delegate. No one wins in this situation. Managers struggle to achieve their goals because they’re too busy, staff members don’t learn new responsibilities, the team may underperform, and low morale and disengagement abound. 

How to get managers to delegate

Managers must be encouraged to lead and delegate, and these tasks don’t come naturally to everyone. Focus on supporting your managers and ensuring they have the help and skilled teams they need to succeed and achieve their KPIs. Consider rewarding managers for successfully completing delegated tasks that led to the achievement of team goals. This can also give managers the confidence they need to pass on responsibilities.

14. Quality control is lacking.

Increased workloads and the need to meet higher customer demand sometimes compromise product quality at growing businesses. When standards drop, customers notice, and they’ll be quick to let you know they’re unhappy. 

Additionally, employee morale can plummet if workers are called out for production mistakes that stem from focusing on quantity over quality. 

What to do about quality control issues

If you don’t already have them, create and strictly enforce minimum quality standards for production and delivery. Your long-term future as a business is at risk if you consistently fail to meet your customers’ and staff’s expectations.

Instill a culture where quality over quantity is paramount. Give employees the time they need to do their jobs properly and feel confident about delivering on target and to the highest quality.

15. Employees aren’t buying into necessary changes.

If you want to successfully grow your business, your staff must be with you on the journey. However, employees may grow resistant when a rapidly growing business tries to adapt and succeed. For example, you may not get enthusiastic employee buy-in when implementing new software or automating processes they currently handle manually. Change — especially rapid change — can feel threatening, particularly if team members don’t understand the benefits of proposed changes or new processes. 

How to get staff buy-in

Business owners and senior managers have a broad view of operations, while employees have far more restricted perspectives. Successful companies actively work to bridge this gap by involving their staff in decision-making. When you change a process or introduce something new, ensure your team understands the reasoning behind the decision. Show them how the change will benefit them by reducing their workflow, improving their work quality and more.

Train your staff on new procedures and tech tools, and provide them with comprehensive support. Reward them as they adapt to changes to help boost motivation and morale.

Downsides of growing your business too quickly

Business owners may be tempted to throw caution to the wind and chase growth. However, not all growth is good. Here’s a look at some of the downsides of growing your business too quickly and what you can do to prepare.  

Poor customer service

When you grow too quickly, you risk overburdening your customer service staff. Your team may make mistakes or be unable to handle all of the service issues thrown their way. Poor customer service can tarnish a growing business, and overcoming that reputation is challenging. When you grow at an optimal pace, your team is equipped to handle the workflow and provide a customer-delight standard of service. 

Financial mistakes

Small business owners often track financials in their heads or via their own paper system. As your business grows, however, your expenses may add up faster than you thought they would, leading to devastating accounting mistakes. Prepare for business growth by implementing one of the best accounting software solutions early. When your cash flow is steady, consider hiring an accountant to track financials and monitor spending.

Ineffective business operations

When your business is small, it’s easy to give your team autonomy while maintaining an overview of business operations. But as your business grows, a lack of centralized organization can cause operational mistakes. Before your business takes off, create a workplace culture that values teamwork and communication. Ensure everyone can access the information they need to do their jobs properly, including cost estimates, budget planning, cash flow, sales figures and inventory data. 

Hiring mistakes

As your business grows, you must expand your team. But if you grow too quickly, you may rush through the hiring process by just getting bodies in the door rather than seeking out ideal candidates. This can lead to hiring mistakes, poor performance and the additional costs of recruiting even more new people. To avoid these outcomes, establish a hiring process first. Doing so helps ensure you onboard the right candidates the first time.

Beware of unplanned growth

Growth is good, and businesses shouldn’t shy away from it. However, unplanned growth can be detrimental when it hurts operations and takes control out of management’s hands. To avoid runaway growth and the eventual collapse that accompanies it, plan ahead, scale with purpose and avoid biting off more than you can chew.

Adam Uzialko contributed to this article.