Everyone wants their startup business to grow at a fast pace, but is that really the right approach?
Can growing startup business too fast lead to failure?
Let’s see …
In the startup world, we tend to think of rapid growth as the best possible scenario. After all, who doesn’t want to see their company expand rapidly and bring in a bunch of money?
But among some of the many mistakes startup owners make, one of the most significant is growing too quickly.
Expanding too fast can put too much stress on your startup, harming your ability to operate efficiently and please customers.
In the event you have backing from a wealthy investor, you may be able to handle this quick pace of growth, but most startups won’t be able to, and this can actually lead to their downfall.
As a result, it’s important to be aware of when you might be growing too quickly. This way, you can step in and slow things down to a more manageable pace before it’s too late.
To find out if you are indeed expanding faster than you should be, consider these five warning signs.
1) Infrastructure Costs Begin to Outweigh Revenues
As your business grows, so will your costs. If you grow slowly and steadily, then it’s easier for you to absorb these costs and to come up with a way for them to have less of an impact on your business.
But if you grow too quickly, then you’ll likely find your costs are outweighing your revenues, and this all but guarantees your failure.
A good example of this is shipping costs. In the beginning, your logistics contracts might allow for a certain volume. But as you grow, you’re going to need to ship more and more, which can cause costs to skyrocket.
And if all of a sudden you need to hire ten new people and rent out a new warehouse, this could easily sink your business, making long-term success essentially impossible.
Having a wealthy roster of investors who are willing to pay for these added costs helps, but since most startups don’t have this, there’s a good chance these added costs will end up sinking your business into oblivion.
Keep a pulse on your company’s expenses, and make sure to act when you see costs beginning to detract too much from revenues.
2) Every New Task Means a New Employee
The expansion of your startup will inevitably come with an expansion of your workforce. But hiring new people is a costly and time-consuming process, meaning you need to be careful and thoughtful about how you do it.
This consists of spending some time designing roles the right way so that newcomers can quickly adapt to the company and help distribute the workload in a way that makes everyone better.
Startups that grow too quickly often don’t have time for this, which leads to over-hiring. They see they don’t have the people power for one task, so they go out and get someone, not stopping to think how existing staff could be better organized.
This creates a very wasteful scenario. Not only are you spending tons of money on recruiting and training, but you’re also risking bringing people in and then not having enough for them to do.
Both of these can really hurt your chances moving forward and should be avoided at all costs. Working with an HR consulting firm could help you optimize your roles and avoid over-hiring and the problems it can cause.
3) Your Office Is Too Small
A rather tangible sign your business growing too fast is that you’ve run out of room for people to work. Most employees won’t mind if you ask them to share offices or adapt to a less than ideal work environment, for a little while.
However, if things get too busy and too crowded longer term, and you don’t feel you have the resources to get a new office, then there’s a pretty good chance you’re growing too quickly and need to step back to see how you can adjust your strategy.
4) People Are Complaining More Than They Should
Typically, one of the things startups have going for them is that; they can better tend to customer needs. A smaller operation, and a more dedicated team, usually results in better customer service than what a large company offers its customers.
However, as you grow and everything becomes more complex, it’s going to get more difficult for you to provide the same level of customer service.
But again, matching this growth by investing in resources can help you avoid this dip in service. Yet if you’re growing too quickly, then you won’t be able to make this investment, which will result in an uptick in complaints and negative customer experiences.
You should always be tracking what people think of you as a company, and if you notice a change in people’s attitudes and perceptions, then spend some time to see if this could be the result of growing too quickly and you are not able to address your customers concerns.
5) Employee Morale Begins to Suffer
One of the exciting parts of the startup culture is that people tend to be more motivated. The thrill of working on something in its beginning is pretty hard to beat. And this often makes people more flexible.
They may take on responsibilities that aren’t normally theirs, or they may be willing to try new things that could make the company better.
But there are limits to this. Pushing people too far and asking them to be too flexible is going to hurt their commitment to the company, damaging morale and the overall workplace environment. And this can happen easily if you’re growing too quickly and there is an excess of workload on the employees.
Keep track of employee attitudes and think about adjusting your growth strategy if you think people are losing the joy of working for a startup.
Take Away – Be Proactive
If one or more of these components of a rapidly-growing company fits your startup, then it’s time to act quickly.
You’re likely already growing at an unsustainable level, and this will require immediate action that will be difficult to carry out. As a result, the best thing you can do is to be proactive.
Take the time to design a growth strategy that encourages the gradual expansion of your company so that you can avoid the perils of becoming too big too fast.
- How to start a Startup
- How to Survive Your First Year of Entrepreneurship
- 5 Skills & Qualities every Entrepreneur should have
Featured Image Source: Unsplash