As a small business, can a period of high growth be a bad thing? In the current economy, any small business with the good fortune to be growing beyond forecast expectations is likely an anomaly. A period of high growth can often provide a false sense of security and spur dramatic new expansion investments that might prove unwarranted and unsustainable.

Take a look at what’s happening in the large enterprise sector. Companies like Starbucks acted quickly to capitalize on rapid early growth to expand its chain of coffee shops and retail locations. The backlash was inevitable, and when coupled with a downward economy, it resulted in plunging revenues and share prices, as well as the company’s first ever store closures. That’s not the kind of buzz you want your business to be attracting, especially as you struggle to maintain market share. As a small business, it’s important to carefully consider the impacts of high growth and what you need to do to manage it effectively.

While it’s natural think that rapid revenue growth automatically drives good cash flow and strong profits, that’s not always the case. Larger revenue projections mean increased indebtedness to suppliers and higher costs. If revenue should suddenly fall off, you could find yourself in a situation with far too much inventory on your hands and contracts you can’t break – an outcome that increases warehousing and distribution costs, not to mention sitting on product that might quickly become stale-dated. If you offer a service, increased demand might also drive you to increase your headcount and staffing. Again, if business volume should suddenly decline, you now have significantly higher headcount costs and the stress of impending layoffs.

So what should you do when your sales suddenly spike? You don’t want to turn away the business, yet you’re rightly nervous about expanding to deliver it. BizAssist recommends the following strategies to help stop high growth from turning into high stress:

Stick to the Forecast – We’ve written before about the importance of having a long-term rolling forecast – it’s important to stick to it, even when sales seem to be on the rise. If you’ve done your homework correctly, a period of more predictable growth should resume and you’ll avoid making any costly new capital or operating investments. Will you turn customers away? Perhaps, but that’s preferable to costs suddenly spiraling out of control.

Find Ways to Ramp Up without Forking Out – Before you hire more full-time staff, consider short-term contract or freelance resources that might help you deal with increased demand. If the growth trend sticks, you’ll be in a position to turn temporary contractors into permanent employees. You’ll also have the flexibility to scale down quickly if sales resume their normal pace. If you need to ramp up production, negotiate with suppliers or manufacturers to keep pricing consistent. In a perfect world you would be able to take advantage of better volume discounts, but a slightly higher cost of goods is a safe hedge against unstable revenues if it means you can avoid sitting on obsolete inventory.

Consider Short-term Leasing or Financing Arrangements – In the early stages of high growth, it might be wise to consider expanding through short-term leasing or financing arrangements. Instead of large capital outlays to outfit a new store location, leasing and financing will give you greater flexibility and the ability to amortize costs over a longer period of time. Focus on short terms and commitments: while these will be more costly in the short term, you’ll avoid having large capital purchases on your hands that will eventually depreciate and require disposal.

Don’t let high growth cloud good business forecasting judgment. Be creative in meeting the increased demand, but structure your supplier relationships flexibly so you can avoid long-term penalties that could come back to haunt you.