Tuesday, February 18, 2014

Business Boom or Business Bust

Growing your business can be a challenge. You have to manage growth effectively or all the work it took to build business in the first place will crash and burn. I was thinking about this concept at the new Farrell's on Watt Avenue in Sacramento. Yesterday we celebrated my daughter's 10th birthday. Every time we visit Farrell's while we enjoy the top-notch ice cream the service always fails. I immediately noticed that once again it took forever to be seated and once at the table I had to ask for water three times. And like so many other times, the wait staff bumbled and failed. One time I ordered a full platter of chicken fingers, and I ended up with a child's plate, which for my small appetite worked great but it doesn't change I didn't order that plate. We've waited sometimes hours for ice cream.

What is the problem? A young wait staff. A new restaurant ill equipped to handle the crowds. And probably an ill-managed service desk. Since I'm not an expert in restaurants I won't attempt to give out advice.

What is the downside? While people can be forgiving about an initial restaurant open that squeaks and grinds to a hum, it gets tiresome after a while if the hum just bonks. Your enthusiastic crowds will soon wane if nothing gets fixed. Farrell's is an example of sudden growth, but I doubt unexpected. I think the owners knew that it would be a hit right from the start. Many would-be patrons enthusiastically awaited its open.

If you have a business and hit unexpected, rapid growth what can you do? Here are some tips:

Scale: you have to hire judiciously. Demand = slow supply. How does that work? Start with contract work (if it's a service business). Once the contract worker's plate is solidly full-time (give it at least six months), hire them as a full-time employee. Do not instantly hire someone. Once someone is hired the expense is permanent. This arrangement is important over time. Business can ebb and flow -- and sometimes the flow keeps flowing, but you want to see historical trends. I prefer to study it from annual trends. For example, I know every November and December my business ebbs and then come January and February it flows, which leads to my second tip.

Keep your budget prepared for the ebb and flow periods. If you have full-time staff budget funds to cover the ebbs, and use funds that come from the flow periods. In other words when the cash arrives don't overspend. Set aside what you know you'll need during the anticipated low business period (cash reserves).

Once you're ready be ready to deliver. You cannot let business growth get out ahead of you. You have to be ready to deliver what you've promised. The minute you cannot deliver on your commitments the problems will rain down on your business. All the new opportunities will go away as quickly as they arrived.

Under-promise and over-deliver. I've seen sales people make the biggest blunder. They know their team doesn't have the ability to deliver the over-promises they've made to get the sale. So when I say "under-promise" I'm not encouraging you to hold back. What I'm saying is pragmatic. Promise what you know is do-able and then over-deliver. When you over-deliver clients will be impressed. When you under-deliver clients will not only go away; they will bad mouth your company, too, and hurt your reputation.

No comments:

Post a Comment