The Importance of Controlled Growth
It is well-known that entrepreneurs face a nearly insurmountable number of challenges as they bring their business ideas to fruition. Over the course of the past year, we have had the great fortune of speaking with a number of such entrepreneurs in hopes of hearing their advice on challenges they had to overcome along their journey to success.
While many of these entrepreneurs cited challenges in the form of software development, such as the co-founders of Wanderu, or raising capital, in the case of Eight Sleep, but by far the most prominent challenge that these entrepreneurs cited was often related to the scaling of their businesses.
This comes as no surprise. It is easy for entrepreneurs to get caught up in the moment. In the moments of their company’s growth, it can feel as if they are on top of the world; they are launching new marketing campaigns, rapidly gaining customers, hiring more staff, and forming new partnerships. With success after success bringing about a rapid expansion of their company, nothing can slow down the growth of their business, right? Wrong. Once the adrenaline-fueled spree of new hires and expansive growth wears off, it is not uncommon for entrepreneurs to realize that they have either over-spent or over-committed themselves to projects they cannot fulfill.
In order to help you avoid the adverse effects of too much growth, here are a few signs that your company is scaling too fast.
1. Deliverables Become an Issue
For many companies, unfavorable growth can manifest itself in the inability of a company to deliver upon its commitments. For one company that we had the opportunity to interview, this was a core issue that rested upon a lack of sufficient technological development.
Remind’s co-founder, Brett Kompf, noted that the rapid growth of his company led to some issues in regards to deliverables: “in the beginning, the application would fail a lot. We were growing so fast. The first few months we were adding 5000 users a week which at the time was an enormous amount, and we wouldn’t be able to deliver on messages.”
Unable to deliver upon the promises of his application, Brett found himself scrambling to provide his customers with the product they expected. Evidently, Remind was ill-prepared for the exponential growth of new customers they experienced during this period.
Fortunately for Remind, the company was able to develop its technology rapidly and make good on its commitments, but many businesses are not as fortunate. In order to avoid the pitfalls of such rapid growth, it is important for businesses to have a solidified growth plan. In this way, even if its number of customers increases dramatically, a business will be prepared for change and be proactive rather than reactive.
2. You Have Too Many New Hires
On the flip side, issues can arise when a company increases its number of hires in anticipation of new business and that business fails to come through.
It is not uncommon for entrepreneurs to fall into the trap of attempting to force growth and/or innovation. Entrepreneurial advisor, and member of the Forbes Coaches Council, Joanne Markow explains: when “companies get funding, the first thing they do is to hire people to innovate.” While new employees can bring many benefits to a new company, over-hiring can lead to large negative returns.
This is truly important for all entrepreneurs to keep in mind. Hires should occur in a balanced ratio with the increasing workload. If either element is out-of-balance, financial losses and decreased productivity will follow.
3. Quality is Lost For the Sake of Quantity
Often, when a business amasses too many deliverables to make good upon, it finds itself scrambling to fulfill its commitments. When this occurs, a company is often stretched too thin and begins to sacrifice the quality of its products/service. Whether a company does this intentionally or not, such a response is often a direct result of uncontrolled growth.
Because sacrificing the quality of its products/service can often lead to dire consequences for a company, namely a loss in customers and a rise in customer complaints, the sooner this issue can be resolved, the better. Yet again, the solution rests largely upon a company’s ability to scale back its growth, focus on its internal and operational challenges, and then re-evaluate the feasibility of its growth plan.
4. Operations Overrule Customers
After reading, observing, and learning about this topic in great detail, one of the most interesting pieces of advice came from Kelly Byrnes of the Voyage Consulting Group. Cited in a Forbes Article, her entrepreneurial advice rested on the principle that a company’s main focus should be on its customers. When this focus is lost in favor of operational activities, it should be a red flag to any business, warning them that they are scaling too quickly: “To recognize premature scaling, review the notes from your last five leadership team meetings. If more time was spent on internal operations than on customers, your scale may be off. To correct an imbalance, shift focus to customers and minimize internal investments. Stay nimble while the market gets used to your product, pivot according to customer input, then scale for the customers who stick.”
5. Customers Complain
At the core of every company lie its customers. When a company grows too fast and too soon, the confidence of its customers often begins to fade.
After closing 120 projects in a five-week period, the small Gigster team found themselves in a position where they couldn’t possibly deliver upon all of their promised commitments. For founder Roger Dickey, this was a period of extreme pressure; many of the small businesses that they closed with came back and threatened to sue them if they didn’t deliver exactly what was promised.
Evidently, the inability of a company to make good upon its commitments places it in a dire situation; for Gigster, not only were their customers dissatisfied but now, they had become a business risk. To best avoid this, entrepreneurs like Gigster’s founder advise an approach centered around smaller, smarter growth: rather than simply taking on every project one comes across, it is important to pick and choose what commitments are worthwhile and which are not. In this way, a company can grow steadily without compromising its relationship with its customers.
While growing a business past its early stages can often be the most exciting part of being an entrepreneur, as with anything good, there is always a bad. If not done carefully, growing one’s business can have dire consequences. In order to avoid spreading one’s company too thin or wasting valuable resources, most successful entrepreneurs advise the same thing: slow down, think long-term, and take the growth of your company one step at a time.