What Are The Five Traps You Need To Avoid As Your Startup Grows?

Your business is growing nicely. Revenue keeps going up month after month, quarter after quarter.

Soon, you’re going to need to new office space because of the all the people you think you need to hire. But, you’re worried deep down inside.

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You wonder, “What if the growth suddenly stops?”

Worse, you wonder, “What if we start losing business?”

I know some people will tell you, “Go for it! Take advantage of your opportunity and keep growing fast.”

I agree that you should go for it, but only to a point. You see, I don’t like taking unnecessary risks because taking unnecessary risks can get you killed.

So, how do you grow your company in a risk-averse way?

Here’s what to watch out for in the growth phases of your company:

Phase 1: Pre growth to early growth.

You put your seeds in the ground. Feed them water and fertilizer, and you hope they’ll grow.

But you may need to change the mix of nutrients you feed your plants. That’s the early growth phase.

Here are some things to look out for:

A. The one customer syndrome.

Do you remember the company Portal Player? I sure do.

Portal Player IPO’d on the back of one very larger customer (Apple) that represented 90% of their business. And Portal Player died when that one very large customer (Apple) walked away from them.

It’s very rare that a company gains multiple large customers from the start at the same time. The question becomes should you scale your business on the basis of the one very large customer you have?

So, should you hire a bunch of people based on this one big customer you have? Or should you delay hiring as long as possible?

I am in the “run the company as if the major customer doesn’t exist” camp. I would hire or contract out the staff needed to service the one big customer you have and that’s it.

That way, just in case your one big customer goes away, you don’t have to lay off a lot of your staff.

And there’s nothing worse then going through lay offs.

Yes, you may cost yourself some growth by taking this approach. I fully acknowledge the risk. However, your company will live to fight another day.

B. The “we just grew 70% last month” syndrome.

You’re on your way. Maybe.

But maybe you’re not. Growth at this early stage comes and goes in spurts.

So yes, keep pushing. And yes, keep hiring to your plan. But don’t increase your hiring because you had one month of tremendous growth.

Phase 2: The we’re stuck phase.

Sometimes your growth stops early. And sometimes your growth stops later.

There are some signs to look for BEFORE your growth stops that can keep you growing and not getting stuck. Let’s start with:

C. The wrong people syndrome.

For example, let’s say the next phase of your growth relies on improved customer service. And some of the team members you have don’t go the extra mile with your customers.

Guess what? You’re going to have to replace the team members that don’t fit.

Or maybe you’ll run into this problem…

D. The Let’s Add A Rule Syndrome.

Some rules are necessary, but, in general, you want to avoid adding too many rules. Why?

  • You’re stifling the growth of your team. And you’re going to need your team to grow if you’re company is going to grow. And…
  • You will kill the entrepreneurial spirit of your team. Nothing pisses early employees off like a bunch of unnecessary rules. Finally…
  • Too many rules will slow the decision making of you and your team. Remember that part of what made you successful early on was how quickly you adapted and made decisions.

Or maybe you’ll run into this problem…

E. The Hiring Down Syndrome.

The challenge is how to do keep hiring more and more quality people?

The pressure you and your team are under to fill open positions and keep up can cause you to hire people you wouldn’t have previously considered. So you hire some B players and you think to yourself, “We’re still able to keep up.”

Then, a little while down the road, your growth slows. And you don’t have the quality team to solve the problem.

I’ve seen firsthand how lowering your hiring standards can destroy a company. Now to fix this problem you have to terminate a lot of people and hire a new set of executives and other team member.

The bottom line is Hiring Down Syndrome can be really bloody to fix.

If you only remember one thing from this post, remember to make your ability to hire quality people the limiting factor on your growth.

Conclusion: Most, if not all, of your scaling issues will involve people.

Hire too early and you run the risk of burning through your cash and having to lay off quality people. Hire too late, and you can miss the window of opportunity.

Later on, the challenge becomes making sure you have the right team as you continue to grow.

Sometimes you need to replace team members that no longer fit where your company is going. Other times, you can’t hire fast enough to keep up with your growth.

Just remember to grow your company at the rate you can hire quality people. You will not regret it.

For more, read: http://www.brettjfox.com/what-are-the-most-important-things-to-keep-in-mind-when-scaling-a-startup/

Written by

I work with startup CEOs to help them grow their businesses . I built several businesses from $0 to >$100M. Learn more at www.brettjfox.com

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