There is a strange silence in the factory at the moment.
You almost jump when a machine is switched on.
Most of the team is busy installing on site, leaving only a few hands to manufacture.
At our work site, things are manic. Against the constant background noise of bulldozers landscaping, jackhammers breaking stone and our woodworking machines, the team is scurrying around, measuring, sawing, hammering, sanding.
The pressure is on to deliver, and to deliver to the client’s expected standard.
But, there is another pressure playing out at both the factory and the work site: cash flow stress.
The 45-minute drive between the factory and site means there is about an hour and a half extra each day to think. And to stress.
Cherryhill Woodcraft finds itself at an interesting crossroad – we are growing in a depressed economy and we want to continue growing. But, we are trying to box clever as we are well aware of how many businesses have gone bust because they could not handle a growth phase.
According to Economists.co.za’s Mike Schüssler, the median lifespan of a small or medium enterprise in this country is five years – about 1800 days of grind before the final bell rings.
Now, growth is not necessarily linked to time in business. Many business owners have no desire to grow beyond what is comfortable and manageable. In fact, Cherryhill, at 20 years in business, is a late bloomer.
But, what the statistic does point out is that it is exceptionally easy to go out of business.
And, over the years, I have seen my fair share of businesses going bust while trying to grow.
One of the main reasons is cash flow – you overextend yourself chasing the long-term dream and you cannot pay the short-term bills. The slope is slippery.
In many other businesses, bridging finance would be the answer to fund growth – you borrow the money needed to increase capacity. And, if we were making a range of furniture as opposed to bespoke pieces, it might have been the answer for us.
However, in our business, capacity almost seems to be finite and it takes a long time to scale.
There are few good quality, trustworthy cabinetmakers around, meaning human resources cannot be added quickly to increase capacity.
Similarly, the nature of our business means slow turnaround times – custom, high-end furniture simply takes a while to make.
As a result there are sometimes huge gaps between pay cheques, especially when you are working on large projects.
So far, it has been a juggling act to balance larger projects with smaller ones. A quick turnaround on one equals cash to fuel the other.
Hopefully, the balls won’t all come crashing to ground in one go.
And that means managing the risks involved in growing and only overextending as far as is reasonable.
As a result, we sometimes have to say no to certain new projects, which sounds crazy in the current economy.
But, you can easily go bust trying to grow too quickly – patience is not a virtue, it is an exceptionally important commodity right now.
- This article first appeared on BizNews.com.