CFO Insight LLC
High-growth companies must always remain ahead of the curve, and infrastructure may be a key to their long-term success. Many companies that are in the right place at the right time have exponential growth over the first few years. A word of caution for those hyper-growth companies… don’t outrun your infrastructure.
A simple example to review:
In this extreme example, if a company starts operations at the beginning of the year, and achieves annual sales of $100 million, company executives may consider the business to be a $50 million company and size the infrastructure appropriately. That is, they will compare the size of certain functional areas to that of peers with $50 million of sales. Such an infrastructure will not meet the business needs.
Let’s examine several functional areas in the example:
The challenge in a high growth company is to thoroughly understand the impact of growth on the infrastructure, and remain ahead of the demand curve. It is critical in a high growth company to properly resource the business since an under-resourced operation will likely never catch up with the demand, and as a result deliver substandard customer performance.
If there are ineffective controls, inadequate reporting and poorly defined operating metrics to monitor performance, a well-intentioned organization may begin to take shortcuts. These shortcuts may either push the company out of control, or ruin the company’s customer service and reputation.
Recovering from an out-of-control process will be excessively expensive, and in a highly competitive business, will no doubt seriously impact market share.