How to get over the hump? (especially in a manufacturing business)

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September 10, 2021

by a searcher from Carleton College in Leesburg, VA, USA

Many of the businesses that I look at are at a sort of inflection point in their development. Owners feel that they are on the cusp of a strong expansion, but they are also caught in a loop. They need to hire more people to fulfill orders, but they need cash from order fulfillments to hire people. This is especially pronounced in a small niche manufacturer because they also have to spend capital on parts and supplies to fulfill orders.

I have several questions about this loop or hump -- well, my first question is whether there's a name for it. It is very common for the size of business that I have been searching, so I expect there must be a name for it and research on it.

Second, where can I find literature on how to overcome the hump while minimizing debt and risk?

Third, does anyone here have insights to offer on the general problem and steps toward solving it?

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commentor profile
Reply by a searcher
in Orlando, FL, USA
Speaking from experience with bootstrapping growth, the way to get over the hump is capital. Capital = hiring, purchasing, etc. Growth without capital creates a number of problems. Employees become overworked, customers get subpar products, deliveries are delayed, resources become stretched, etc. If it were me I would want to understand the working capital and growth capital requirements. I would start with talking to an accountant that has experience operating the books for a small manufacturing plant.
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Reply by a searcher
from State University of New York (SUNY) in Buffalo, NY, USA
Anna -- you may want to check out a book called 'Scaling Up' by Verne Harnish if you haven't already. The 4th section of the book covers how to move past capital constraints to grow a business. I'd also recommend a book called 'Factory Physics for Manager' by Spearman, Pound, and Bell. This is a more tactical book on operating in manufacturing and service businesses. They have a few tools you could use to optimize inventory and production to improve cash flow.
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