Is Your Business Growing Too Fast?
Every business owner knows the rush of seeing a windfall of customer orders come through the door. It’s confirmation in many ways, of the reason you started your business in the first place: to make a product or service that is useful, enjoyable, or better than your competitors. But growing too fast as a company can threaten all of this.
If producing more product as a company eclipses employee wellbeing, prudent financial decisions, or maintaining simplistic workflows, consider whatever short-term success you’re experiencing a pitfall to your long-term strategy. Long-term strategies feel slow and plodding. They’re not particularly exciting but are the consistent good habits which move the barometer on success.
Things like checking in with your staff, staying within the parameters of your budget, setting up company standards and best practices, and dealing with kinks in your product pipeline. It is the least exciting part of running a business, but the most important aspect if you want to stick around for longer than a few years.
5 Signs of a Business Growing Too Fast
The signs of growing a business too fast look similar across industries. Good business principles are one part accounting, one part agile leadership and responsiveness to problems that appear. Here they are in no particular order:
Cash flow mistakes
Lack of focus/overspecialization
Top-heavy infrastructure or staffing
Chasing immediate gains vs. long-term success
Messy or waste-heavy workflows
Risks of Growing a Business Too Fast
The principles of good financial practice for a business is not unlike managing your own personal bank account. All the common sense approaches apply: you shouldn’t spend what you don’t have. Overhead costs need to stay small or manageable in relation to profit.
Terms with creditors should be adjusted for the most favorable terms to ensure money going out does not exceed money coming in. Stay within safe operational margins to ensure that the business has financial guardrails to ensure continuity of service.
Lack of focus is a classic problem for entrepreneurs eager to please a loyal customer base. The temptation is to take popular customer requests or demands and over-engineer existing products instead of focusing on the business’s true scaling priorities. A broad strategy is a dead strategy in the world of startups. To move fast, you need to be nimble and in most cases, narrow in scope. Adding more features to a product, more items to the menu, or services to an already existing platform threatens to overwhelm staff, confuse prioritization, and create bulk . Keep the main thing the main thing and it will help your business stay lean.
While bulky products can add weight to your operations, so can a top-heavy infrastructure. Without an aggressive approach to eliminating complexity or building systems of standard practices to handle it, a startup can quickly grow out of control. Employees get mixed messages from leadership, customers get miscommunication from employees, and increasing fragmentation and inefficiency threatens to implode the reputation you’ve worked so hard to build. Once a business owner sees this trend, it is absolutely essential to resolve the underlying issues.
Something else that threatens longevity in businesses is when owners do not prioritize customer service support in the early stages of business. Without support for a popular product or service, it will not stay that way for long. Negative customer feedback and experiences will kill a startup business. Keep this in mind as you plan around adding more team members. Keep it strategic and front-load customer support staffing to ensure repeat customers. Building simplicity and elegance into your business strategy is also applicable to staffing. Decide whether each person you hire is essential to driving where you want to go in the next six to eight months. If the answer is not immediately obvious, hold off on the hire.
Tips for Growing a Business at the Right Pace
Growing a business at the right pace means knowing what is happening inside and outside your company. Monitoring the market demand for your products shows where to put your spend. Is there an increased customer demand for what you are selling? A new product to introduce with massive demand and a high degree of repeatability. How well do you understand that demand? Is it a one-time false surge or are you consistently receiving orders that are beyond your capacity to deliver?
Reading the signs is a skill set of the best leaders. It’s easy to rush into spending a lot of time and money to build a service offering that might suffer from oversaturation a year from now. Knowing your customers and what is the most reliable, repeatable product sustainable to your success is half the battle.
Another pacing factor is innovation. With something as massively disruptive as the pandemic, many businesses, including restaurants, have struggled to pivot in the face of cliff-like decreases in customer demand, regulatory requirements pressuring the workforce, and sporadic disruptions caused by changing travel regulations. Learning to pivot toward different strengths of your fast-growth business is essential for any entrepreneur. No matter how prepared or brilliant the product, a time is coming, or has already come, when that plan will go out the window. Ad Hoc creativity and invention are required to move where the demand is today— not a year ago. The more agile and flexible a business is in response, the better the outcome.
5 Common Reasons Why Startups Fail
Startups are a gamble for many reasons. Cash-flow mistakes, overhead costs, and the siren-call of achieving wild overnight popularity leads business owners to chase immediate success over long-term maturity. It’s easy to get caught up in the headrush of funding rounds and spending money faster than you make it to see how quickly you have a problem. Stakeholders and investors need to see their returns.
While it might not be easy to create a product that is popular, it’s even more difficult to harness that popularity into longevity. Maybe you are doing all the right things: weighing risk against benefit in your spending; supporting your team with additional hires; investing in product quality and customer service. But it still isn’t enough to succeed.
There are a few reasons why startups fail before reaching maturity.
The market runway is short or the launch is ill-timed
Confusion over core offerings or prioritization
The company cannot pivot because of investor disapproval or organizational lag
Product problems hit a wall or become insurmountable
Cash dries up too quickly
Many startups fail because of a weak business case for the idea. Is the market well-researched upfront? Does the business have substantiated reasons to think the target market will bite? If those reasons are unclear or are exaggerated, the projected outcome for the startup is weakened.
Sometimes the caveat to success is market timing. Competition wins out over a startup’s offering because it wasn’t differentiated enough or hit the market at the wrong time. If customers don’t back the investment, it might be a reflection that the offering was made too early or too late. Startups can be a bit like the stock market in the sense that volatility is high.
Confusion over core offerings or prioritization is yet another pitfall. In the rush to get a thing off the ground, leaders can fumble on having a defined goal or future. It is hard to do this in the present tense and keep the business running in the face of so many pressures. Many startup founders are young with a healthy appetite for risk but this does not guarantee sound leadership skills.
Since a startup is beholden to investors and stakeholders making a return on their investment, some of the most important business decisions a startup makes are in the presence of the board of directors. If the board is not balanced with independent additions to balance the interests of investors, this can skew decision-making one way or the other.
Leadership with a keen business sense is essential for steering a startup in the right direction. In addition to oversight, the startup’s leadership needs adequate freedom on the ground to make adjustments as they see fit. Losing this level of control may force it into a gridlock of indecision or coax it into complacency when a certain aspect of the organization needs a quick pivot or redirection.
Product pipelines or deliverability also pose a major risk to startups. Infrastructure is not solidly in place when the product is first created, which means that productivity at multiple levels may begin to feel clunky or out of sorts. If the consumer feels this lag, it can threaten the startup’s viability and market valuations.
Startups are a dance of competing headwinds, especially as liquidity is concerned. Infusions of seed money and some level of intuition are required to know when to step on the gas and how furiously. Some aspects of genius are also madness, and it means that taking an outsized risk to get where you need to go is essential. Having advisors who know how to read the weather and make gut-based decisions is a requirement for startup leaders.
Growing a Business with Coachwell
Growing too fast in the wrong areas, or making poorly timed decisions are challenges even the best leaders face. It isn’t a matter of ‘if’ but ‘when’ these things happen in business. That’s why it is best to be proactive with a business coach ready to help you scale your business through the startup phase and beyond. Coachwell team members are experts at helping your company move to a mid-sized business plan if that is your wish, or continue to serve the vertical where you are making the greatest impact as a small business. We make your goals our success!
