Plan for success and prevent failure
Your sales forecasts and those of your distributors will sometimes be too optimistic. We are often tempted to embellish them in order to seduce shareholders and bankers. But how to plan for this growth and what happens when the forecasts do not correspond to reality? Unless you are invited to present your company on TV, you cannot expect miracles when marketing new products or entering a new market.
The sales cycles can be longer or shorter depending on your flexibility, but in general, organic sales growth follows a steady and constant course, with more or less flow. There may occasionally be a few rapids, but it will probably not be like Niagara Falls all the time. Be well-informed if this is the way you plan to grow your business!
You need to put contingency plans in place to limit your exposure to risk. Then, study the costs well and set achievable and realistic goals. If your numbers are too ambitious, you risk investing too much for this growth and this situation often leads companies straight to bankruptcy.
Control the demand… and your expenses
You must manage any form of fluctuating demand for your products. Would you be able to make adjustments (easily) in case of decline and, conversely, would you be able to deliver growth following sudden pressure on your sales, without losing control of your costs? The cycles can hurt if they are too variable, the structure set up during peak periods must be easily modulated during darker periods or when cruising. Moreover, we cannot always predict how long the cycle will continue, both in terms of growth and decline.
Your organization must therefore develop the ability to expand AND compress costs and resources. In my case, I developed this with experience and many trials and errors… The idea is to make the organization survive while you get to know it and lead it. We can always apply management skills acquired in other organizations, but you have to really understand the essence of your company to guide it to sustainability. This is only acquired with time. People can always give you advice, but you, and you only are able to make the most informed decisions. You have to learn to trust your entrepreneurial instinct.
It is therefore essential to manage variations with a flexible approach by limiting fixed costs. Accept the temporary discomfort of delivery delays and know how to analyze and understand your annual sales cycle and potential fluctuations. This will come with time, if you are diligent, responsible and selective enough in your approach to growth.
You can go after financing, over and over again, dilute your interest and get money at a high price to finance strong growth with unprofitable sales… This is another way of running a business, but not the one I recommend if you want to stay onboard, or if you want to sleep well at night… Nevertheless, for some, there is nothing better than a big turnover to boost their ego and show that their company is a success. Even when it’s not profitable! But that is still a well-kept secret.
In short, profitability will allow the company to continue its activities in time… regardless of the level of growth, there will certainly be creditors who will embark on the adventure with you, but in the end, your success will end even before you have made a profit if the growth objective exceeds that of the profits generated. On the other hand, paying too much attention to the benefits can make the entrepreneur lose the passion that led him to create his products or services in the first place. He could even see his clientele collapse if he is not sensitive to psychological price thresholds. Profit does not mean that you can spend money left and right, either… but this will be the subject of another article…