How to Tell If Your Business Is Growing Too Quickly (And What To Do About It)

1. 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 data supports this challenge: According to OnDeck’s Small Business Cash Flow Trend Report, 30% of small business owners cite cash flow as a top challenge. Additionally, research from PYMNTS Intelligence shows that 22% of US small businesses struggle to pay bills due to cash flow issues, highlighting the critical nature of this challenge during expansion phases.

What to do about insufficient cash flow

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. Overestimate expenses and underestimate revenue so you have a margin of error within which to operate.

Most cash flow problems associated with rapid growth result from money being tied up in accounts receivable. An invoice factoring company will loan you a large percentage of your outstanding balances while actively pursuing debt collection.

Rapid Growth Cash Flow Assessment Checklist

1. Calculate your cash runway. Do you have at least 3 to 4 months of operating expenses covered?
2. Review accounts receivable aging. Are more than 30% of invoices overdue?
3. Analyze cash conversion cycle. How long does it take to convert sales to cash?
4. Evaluate seasonal fluctuations. Do you have adequate reserves for low periods?
5. Assess payment terms with suppliers. Can you negotiate extended terms during growth phases?

2. Employee morale drops

An increased workload can contribute to employee stress. Other factors can hurt employee morale and reduce productivity as well, including:

• Frequent changes to processes and procedures
• Less direct contact with management
• Uncertainty about job security and career advancement
• Increased pressure to meet higher targets

What to do about declining employee morale

Increasing compensation is an obvious solution to bolster morale, but it may not be possible amid cash flow issues. If you can’t give raises or offer discretionary bonuses, consider providing creative perks and finding other ways to boost morale, including:

• 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

Employee Morale Assessment Checklist

1. Conduct anonymous employee satisfaction surveys quarterly.
2. Monitor employee turnover rates. Healthy businesses maintain less than 15% annual turnover.
3. Track absenteeism patterns for early warning signs.
4. Schedule regular one-on-one meetings between managers and direct reports.
5. Implement clear communication channels for feedback and concerns.

3. Customer service quality drops

A sudden uptick in customer service complaints could indicate your business has grown too quickly. As your business grows, it can be challenging for your staff to give 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 customer experience suffers, you have two choices: hire more people or take on less work. 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.

Customer Service Quality Assessment Checklist

1. Track response times for customer inquiries. Aim for under 24 hours.
2. Monitor customer satisfaction scores. Maintain above 85% satisfaction.
3. Review complaint resolution times. Resolve 90% within 48 hours.
4. Assess first-call resolution rates. Target 80% or higher.
5. Evaluate customer retention rates. Healthy businesses retain 85 to 90% annually

4. Management becomes reactive instead of 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.

“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

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.

Proactive Leadership Assessment Checklist

1. Schedule weekly strategic planning sessions separate from operational meetings.
2. Allocate at least 30% of leadership time to future planning activities.
3. Establish clear delegation protocols and accountability measures.
4. Implement dashboard systems for real-time operational monitoring.
5. Create contingency plans for key business scenarios.

5. Employee performance standards drop

Quick growth can lead to a rapid increase in individual workloads, and 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.

Performance Standards Assessment Checklist

1. Track key performance indicators (KPIs) for each role monthly.
2. Monitor deadline adherence rates. Aim for 95% on-time completion.
3. Assess quality metrics specific to each department.
4. Review employee training completion rates and effectiveness.
5. Implement peer review systems for continuous feedback.

6. Old systems and processes can’t keep up

The processes you relied on earlier in your business’s development may have worked fine at one point. For example, various teams and departments may have used their own apps and databases early on. 

As your company grows, you’ll find that siloed departments derail communication and collaboration, creating errors and missed opportunities. Standard operating procedures (SOPs) and centralized data management are musts for effectively managing a growing business.

What to do if the old ways are holding you back

Customized CRM systems 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.

Systems and Process Assessment Checklist

1. Audit current software and tools for redundancies and gaps.
2. Evaluate integration capabilities between existing systems.
3. Assess data accuracy and accessibility across departments.
4. Review process documentation and standardization levels.
5. Calculate time savings potential from automation opportunities.

7. You create too many layers of middle management

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:

• Communication delays: Messages get filtered or distorted as they pass through multiple management layers.
• Decision-making bottlenecks: Additional approval layers slow down critical business decisions.
• Increased overhead costs: More managers mean higher payroll expenses without proportional productivity gains.
• Reduced employee autonomy: Front-line workers may feel micromanaged and lose initiative.

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:

• Define clear roles and responsibilities: Each management position should have distinct value-add functions.
• Implement span of control guidelines: Most effective managers supervise 5-8 direct reports.
• Establish decision-making authority levels: Empower managers to make decisions within defined parameters.
• Create cross-functional teams: Reduce silos by having managers collaborate across departments.
• Regular management effectiveness reviews: Assess whether each management layer adds measurable value.

Management Structure Assessment Checklist

1. Map organizational hierarchy and identify redundant layers.
2. Calculate management-to-employee ratios by department.
3. Assess decision-making speed from request to resolution.
4. Review communication effectiveness between management levels.
5. Evaluate management development and succession planning.

8. You can’t meet demand

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.

Demand Management Assessment Checklist

1. Track inventory turnover rates by product category.
2. Monitor stockout frequency and duration.
3. Assess supplier lead times and reliability.
4. Review demand forecasting accuracy monthly.
5. Evaluate customer backorder and cancellation rates.

9. You make rash decisions

Business leaders often feel emboldened during expansion periods and become supremely confident in their ability to manage risk. 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.

Strategic Decision Assessment Checklist

1. Require data-driven justification for all major decisions.
2. Implement a cooling-off period for significant strategic changes.
3. Establish decision criteria aligned with long-term goals.
4. Create accountability measures for decision outcomes.
5. Schedule regular strategy review sessions to assess progress.

10. You lose focus on customers

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.

Customer Focus Assessment Checklist

1. Track Net Promoter Score (NPS) quarterly. Aim for scores above 50.
2. Monitor customer acquisition cost vs. customer lifetime value ratios.
3. Assess customer service training frequency and effectiveness.
4. Review customer feedback collection and response processes.
5. Evaluate customer retention strategies and success rates.

11. Creative and innovative thinking stagnates

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.

Innovation Assessment Checklist

1. Allocate dedicated time for creative thinking (at least 10% of work time).
2. Track idea generation and implementation rates.
3. Assess investment in research and development activities.
4. Monitor competitive intelligence and market trend analysis.
5. Evaluate employee participation in innovation initiatives.

12. Staff turnover increases

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.

Staff Retention Assessment Checklist

1. Calculate monthly and annual turnover rates by department.
2. Conduct exit interviews to identify common departure reasons.
3. Track employee engagement scores and satisfaction surveys.
4. Monitor internal promotion rates and career development opportunities.
5. Assess compensation competitiveness within your industry.

13. Managers struggle to delegate

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.

Delegation Assessment Checklist

1. Track manager workload distribution and overtime hours.
2. Assess team member skill development and growth opportunities.
3. Monitor task completion rates for delegated responsibilities.
4. Evaluate manager training in delegation and leadership skills.
5. Review team productivity and goal achievement metrics.

14. Product or service quality suffers

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.

Quality Control Assessment Checklist

1. Implement standardized quality metrics for all products/services.
2. Track customer complaints and returns/refunds monthly.
3. Conduct regular quality audits and inspections.
4. Monitor employee training in quality standards and procedures.
5. Assess supplier quality and consistency in materials/components.

15. Employees resist change

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.

Change Management Assessment Checklist

1. Assess employee communication and feedback channels.
2. Track adoption rates for new processes and technologies.
3. Monitor training completion and competency levels.
4. Evaluate resistance patterns and address underlying concerns.
5. Measure improvement in efficiency metrics post-implementation.

Adam Uzialko contributed to this article.