In our last post we identified so-called ‘Founder’s Syndrome’ as one of the pitfalls to look out for when growing a small business into an altogether bigger entity. Unfortunately, it’s not the only challenge you’re likely to face during the transition, especially if you do it too quickly or in an uncontrolled manner.
SME Toolkit warns that over-expansion – company’s getting too carried away by their potential for growth – is one of the main reasons why firms can fail during this sensitive stage. It recommends creating a roadmap for expansion that identifies risks along the way and sets realistic goals. It suggests: “As a rule of thumb, plan capacity based on a five-year projection of demand and allow an additional 10% of capacity over and above that for periods of heavy demand or for partial down-time in any part of your business. More than this could be very risky and leave a business with overheads it can’t cope with.”
Your project management schedule should also set dates for when deliverables are likely to be achieved. Let customers know beforehand if they’re likely to experience any disruption to normal service, and use the completion of targets to drive marketing campaigns, letting them know what extra products and services are now available.
Building in financial contingencies is also important. Put bluntly, growing a business costs money. Often, lots of money. These financial investments can soon sour if you’re unable to keep up with the strings that come attached to them. It’s always best to seek professional financial advice before committing to buying new equipment or building a new premises. Just as you would when buying a new car or mobile phone, shopping around for the best deal is also vital. Research and a little bit of effort will nearly always pay off.
Sometimes, giving the appearance of growth is half the battle won – and often a fraction of the bill too. If you’re a home-based business with aspirations of a city centre office suite but you don’t necessarily need to meet customers face-to-face, consider a PO box in the meantime, which will present a commercial image and cost as little as £120 for six months. Shortcuts like this can make startups look bigger than they are, and set the tone for a full-on scale-up later.
Another pitfall of growing too fast can be found in staffing problems. Rapid expansion means mistakes can often be made when hiring people. If you’re under pressure to fill situations fast, it’s difficult to evaluate candidates as thoroughly as you would normally, inevitably increasing employee turnover while also disgruntling people who have been working with you from the start. So, be careful who you take on – and be extra nice to the loyal staff you already employ.
Finally, an article on the subject for Houston Chronicle warns that rapid growth can lead to declining quality. It cites the example of Toyota, which some years ago tried to ramp up its operations to own a 15% share of the global car market by 2012. In the process of trying to be the world’s largest auto manufacturer, however, the company, apparently took its eye off quality control, forcing two major recalls. The article continues: “The company responded by halting production of eight models that accounted for half its domestic profits. To analysts, the results suggested that Toyota compromised its reputation for quality, which had been central to its corporate identity.”
Don’t be put off though. Being aware of the challenges you face will only make your expansion plans more watertight – and, consequently, more likely to come to fruition. Caution is key. As a piece for entrepreneur.com concludes: “Learn your lessons from other companies’ mistakes, and instead of dealing with awkward growth efforts, you could find yourself the most popular kid on the block.”