graphManaging growth is a critical part of keeping a new company healthy through major changes early in its life. Adjusting operations or stopping production and innovation to find new sources of funding can really take the wind out of a company’s sails. Determining your company’s self-financeable growth rate is an important part of mapping the future.

Here are three things you need to know to be able to manage growth effectively:

  • How much cash is generated for each dollar of sales?
  • What is the company’s operating cash cycle? How long does money remain tied up in assets and inventory before it’s available? There are many factors that contribute to a company’s operating cash cycle. How long it takes to receive income from your sales, the amount of time you have to pay suppliers, and the amount of time you store inventory are all important factors.
  • How much cash is required, including operating expenses and working capital, to finance one dollar of sales?

Knowing exactly how long you can successfully sustain growth before you need to approach investors takes a lot of the stress of growing a company out of the equation. Taking time to really focus on getting to the answer is worth the investment of time and energy.

If you plan to approach investors, understanding your company’s self-financeable growth rate and being able to explain its components will help you find the right partners.

For an in-depth explanation of this model with an example company, check out this article recently re-published in the Harvard Business Review. The model was so useful that the author revised the original version published in 2001.

Hiring the right people in times of growth and change in a company is challenging. Small companies trying to take over a chunk of the market share in their niche don’t often have the time or resources to find the perfect fit. To learn how Wahoo Recruitment helps new and emerging companies find, recruit, and hire the most talented and driven candidates, please contact us.

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