“Everyone knows that too few sales are fatal. But very few owner-managers understand that too many sales, made too fast, can kill a small business. Managing the growth in sales is another make-or-break condition of small business success.”Written by Paul Resnik in his book the Small Business Bible.
Too many sales can be fatal? What is he talking about? Why does he think that? He thinks that because as we have seen in our years of helping hundreds of business owners he is right. Most business owners, especially in the early years of business, are challenged by too few sales and so it is impossible for them to imagine that too many sales would be a worse condition.
It is all about capacity. Every organization has the capacity to deliver their products or services in a timely manner. While in the small business world the same person is very often developing new business AND delivering to their clients they usually have the capacity.
Then the sales begin to grow. Slowly at first but as time passes the speed of growth picks up until the unfortunate day arrives. The company no longer has the capacity to deliver on all the sales. And this is what happens:
- You can no longer deliver in a timely manner
- Quality plummets
- The customers are disgruntled and start going to the competition
- Referrals stop
- In the rush you forget to invoice customers
- The panic causes stress and lack of sleep and is harmful to your health
- There is no time to collect Accounts Payable
And on it goes until the sales have declined and the business is in serious trouble. This is why growing a business is more, much more, than just increasing your sales. You have to also build the capacity and the infrastructure. You have to hire and train people. Develop and document processes. Identify and manage the Key Business Indicators. In short you have to manage the whole business. That is a far bigger job than just increasing the sales!
