Everyone loves a high-growth company. People want to work for it. Investors want a piece of it. The press idolizes it. However, believe it or not, there is danger in growing too big, too quickly. And this danger has brought many a company to its knees.
Krispy Kreme is a perfect example. When it attempted to expand too quickly beyond its trademark 'Hot Doughnuts Now' to selling pre-boxed sinkers in gas stations in the mid 2000s, the stock market concluded it was no longer a sweet deal as stocks hit a record low of $6 per share at that time.
Finding the right level of sustainable growth is one of the first essential steps an entrepreneur needs to consider and think through before ever opening the doors for business.
Finding that sustainable pace of growth will mean something different for every startup. But every business will need to dodge these nine common pitfalls:
1. Leadership exhaustion
The more leadership is confined to one or a few people, the more those people will be sucked into the day-to-day management of the company. This means more and more hours at work and fewer hours to manage and focus on the big picture.
2. Troop exhaustion
When the workload is growing quickly, you sometimes don’t have the time to add qualified staff, and the work is piled on to the troops you have on hand. Problem is, there‘s only so much workload employees can carry before they get overwhelmed and collapse.
3. Sloppy hiring practices
As a result of the above, companies scrambling to cover the workload will often hire without taking the time to really evaluate the new hires to make sure they are getting the best people possible for the jobs at hand.
4. Outstripping financing
A well-funded startup can become an underfunded company thanks to initial success. If you have to ramp up production prior to sales, or carry a lot of accounts payable, you might find yourself short on the green stuff when you need it most.
5. Outbuilding your business
If you plan for rapid growth by buying more office space than you need, hiring more people than you need, borrowing more money than you need, you may find this becomes a burden on you if your growth is more modest than anticipated. Before you go buying more office space than you need, try a virtual office or even a coworking space.
6. Outracing your market
If you’re offering cutting-edge products, you might find that even those customers who could really use them don’t yet understand what it is you are offering. There are a lot of startups that failed because they were way ahead of their time. Think Ask Jeeves. Not planning for some catch-up time could threaten the sustainability of your growth.
7. Outpromising your investors
If you promise 20% growth to your investors, a healthy 10% isn’t going to keep them content. Knowing what pace of growth you can sustain, setting the bar at that level and hitting your goal will keep them much happier.
8. Compromising quality
When everyone is working at maximum output, yet demand keeps increasing, don’t be surprised to find that someone in the supply chain starts slacking off in the quality department to meet your delivery deadlines.
9. Losing opportunity
When you’re growing so fast that you can’t seem to find the time to take a meeting or attend a conference, you’re in danger of missing out on a grand opportunity to make your business even better. It’s important to make sure you’re never too busy to keep up with industry trends, what your competitors are doing, the technology in your field and even the latest best practices. All of these are essential to your business’ survival and success.
We know that everyone wants to grow their business at the fastest possible sustainable pace. Recognizing and planning for these pitfalls ahead of time will go a long way toward keeping that line on the chart ever-climbing.