What CEO doesn’t love growth? Every entrepreneur has a dream of launching multiple products into multiple jurisdictions, expanding their empire to new heights. However, I have witnessed more instances of chaotic growth leading to losses vs. responsible and sustainable growth. While there is something to be said about moving quickly and capitalizing on a market opportunity before it is too late, the repercussions of growing too quickly can be far worse than missing market opportunities. I will provide some commentary on some of the common mistakes I have seen working with small businesses.

Hiring the Wrong People

In order to meet an aggressive expansion timeline, companies often rush the hiring process. They do very little work to determine fit with the company and opt for people who are able to start right away instead of people currently employed who need to provide notice to their current employers. I am always weary of individuals who say they can start right away and usually do a little more diligence on reference checks in these situations. These individuals are either 1) Currently unemployed (which is fine if a reasonable explanation is given), 2) Playing an insignificant role in their current job where they can leave with no transition required, or 3) Don’t have any regard for transition requirements and are willing to leave their employer hanging. All 3 are potential flags for me, and I generally prefer to wait for the right employee.

The other consequence is that good people may leave the company because they feel overwhelmed with the expansion. More work and responsibilities are dropped on their desk with inadequate resources, potentially setting them up for failure. 

Unnecessary Innovation

Innovators are key to starting a business, but need to be kept in check during the growth phase of the business. They have a bias towards over innovating. Especially in the technology space, I have seen executives propose expensive upgrades to applications that might go unnoticed by their average user. New concepts need to be validated either through surveys or feedback from your existing customers. Some of the best companies I have worked with have focused on improvements in customer service, which is generally a cheaper and potentially greater value proposition than product innovation. Sometimes, the key to getting new customers is formalizing your processes so your customers have a better experience.

Putting the Wrong People in Charge

More often than not, putting the innovator who came up with the idea in charge of managing an expansion doesn’t work. They are wired to be constantly thinking of new innovative ideas, but lack the skill set to take a product to fruition. It is essential to assign a leader with project management skills to lead an expansion. This individual should have the ability to validate concepts, create a budget, assign an appropriate amount of resources to manage the risk, manage people and ensure timelines are met. If you are unable to shore up an employee with this skill set, I highly recommend you go out and hire someone.

Not Crossing the T’s and Dotting the I’s

The devil is truly in the details. Whether you are launching a brand new product or entering a new jurisdiction, you can never assume the risk of liability is the same as your existing business. You may suddenly find yourself under the purview of a new regulator, jurisdictional laws may require you to take more precautions, and you may just simply not be properly set up to manage risk in a new jurisdiction where you do not have boots on the ground. You may be more susceptible to taking losses from theft or fraud. All legal, regulatory and compliance risks need to be assessed as part of the process in any expansion.

Disorganized Accounting

I will not focus too much on this area, as my last blog focussed heavily on accounting issues, which you can turn to for more details. However, rapid expansion is a very easy way to get your accounting into disarray and may require very expensive clean up in the future.

Compromising Your Culture

As an extension to hiring the wrong people, one of the worst potential outcomes of a rapid expansion may be compromising the culture you have worked hard to create. When people are hired that don’t fit the culture, they begin to upset the earlier members of the team or potentially infect them with negativity. By creating multiple projects, people begin to feel overwhelmed with too much work and the stress starts to kick in. This easily leads to a workplace of negativity as people start to point fingers at each when projects don’t meet timelines. You may see your early employees leave.

In my opinion, preserving your work culture is the most important job of a CEO. Especially when your company grows to a medium size business, this is what the CEO needs to focus on. Changing the dynamic of the culture can potentially be far more difficult once people are set in their ways in an organization. The most successful businesses are ones that create a positive environment that value meritocracy, putting customers first and heavy emphasis on investing in their people.

Conclusion

I will admit I have witnessed circumstances where entrepreneurs have expanded quickly without much thought and experienced success. However, there is always an element of luck in these situations, and for every one of these success stories, there are 10 other stories about entrepreneurs who have experienced massive failures. For the reasons provided in this blog, I believe in disciplined scaling that is purposeful, strategic and steady. Be certain that you have the budget and resources available which gives you the best chance of success.

Finally, while it is more exciting to launch new products in new jurisdictions, CEOs often don’t pay enough attention to their existing operations. I always ask CEOs if they have fully rolled out their core business line with a strong foundation. It is often easier to generate more revenue and profit in your core business where you are already strong, than launching a new product from scratch. One of the devastating impacts of growing too quickly may be that you kill the Golden Goose you have worked so hard to build, which can easily happen if current operations are not solidified with a robust structure.