7 Ways Rapid Growth Can Kill Your Business
Although some business have stayed relatively steady over the last five years, there are some businesses that have had rapid growth. I hope you're one of them! If you do find yourself growing rapidly, be sure to watch out for some of these pitfalls that can happen to business when they grow too quickly. These are brought to you by American Express Open Forum.
How and when to grow are key decisions that every small business must face eventually. In startup mode, growing too slowly means you risk running out of the capital needed to support the basic operational costs before sales reach the break-even point.
But just because you made it past that early stage doesn’t mean you’re safe. Growing too quickly means you face another set of challenges, ones that put you at a greater risk than the slow growth that kept you up at night during those shaky startup years.
Working with entrepreneurs and small-business owners over the years, I’ve watched companies go from small to stellar thanks to a well-managed growth strategy and have witnessed an equal number implode seemingly overnight in an attempt to keep up with the pressure of their own popularity.
For each group, it was a matter of how the businesses managed their growth, and these seven business saboteurs are more times than not the culprit of a downfall.
1. Cash flow crunch. The ebb and flow of cash in, cash out gets more complicated as you grow. It doesn’t take much growth before your monthly expenses exceed your operating credit, and suddenly one bad sales month takes on a whole new meaning.
2. Operational clumsiness. It’s unlikely that you have had a chance (or the need) to implement any of those fancy-sounding operational acronyms that essentially mean running your business as smoothly and as efficiently as possible, because in the old days, doing things slowly didn’t matter.
3. Customer service failures. This is where your popularity becomes a double-edged sword. On the one hand, high demand creates a buzz, further driving demand. The flip-side is that keeping up with that demand is difficult, especially when facing rapid growth.
4. A success spending spree. It’s tempting to see the orders come in as a sign that it’s time to spend. It’s true that growth requires adding team members and infrastructure, but don’t take it as a license to go on a spend-a-thon.
5. Human resource risks. Change makes people worry, especially when that change puts the business at risk. It doesn’t take many months of barely meeting payroll before even your right-hand man is dusting off his resume.
6. Decision-making changes. Growth means stepping back from the day-to-day operations into a leadership role (and that isn’t a bad thing); however, it does disconnect management from the nitty-gritty details that may affect business decision-making.
7. Leadership shortfalls. Any leadership faults become painfully obvious when a company starts to grow. Just as awkward processes only matter when the company needs to scale up, the same holds true for leadership skills.
The best advice for any small business facing rapid growth is summed up in this case study that profiles a startup seed bomb company: Take time to grow!