7 Scaling Challenges That Can Sink Even Successful Companies
Making the decision to scale your startup is an exciting process that has the potential to bring significant success to both your business and to you, the founder.
That said, scaling a company isn’t an easy thing to do, as the many changes needed can derail even previously successful businesses. Here are seven particular challenges to watch out for as you grow:
1. Scaling before perfecting product-market fit
The first mistake the many founders make is beginning to scale their startup too soon. Some founders try to scale with errors still present in the product, believing that the kinks will work themselves out over time. Other founders start to increase growth and production without being clear who their customers actually are (here’s a hint: it’s not always your users!) or without knowing if the market has sustainable demand.
Related: How to Avoid the Sophomore Slump
If you haven’t yet resolved these issues, your company isn’t yet ready to scale. Do your due diligence and perfect your product before you begin to scale.
2. Choosing the wrong people to work with
Whether it’s adding suppliers, staff and/or investors, or growing internal teams, this is one of the most common mistakes founders make. It’s easy to simply accept the help and staff that come along naturally, without thinking about how they fit into your bigger plan. But remember that these people represent long-term relationships, so carefully consider how they will work with your company and culture.
If possible, hire people who have scaled a business before and rely on their expertise, but remember that a strong culture fit and competence is most important.
3. Focusing on sales and marketing instead of building long-term demand
When scaling, many founders focusing on ramping up their sales and marketing activities, but these are only short-term, tactical initiatives. Creating a strong buyer market and building long-term demand is just as important to your overall success -- if not more so. Believe it or not, there is such a thing as over-hiring for sales in your business!
4. Competing on price
As you begin to scale your business, it can be tempting to compete on price. You may think that if you can ramp up production, you can cut your price and still be profitable. While this works occasionally, competing on price more often results in a “race to the bottom,” both in terms of profit and quality.
It’s far better to compete on quality, ingenuity and customer service than to position yourself as your industry’s low-cost provider. If you can sell your customers on the value you provide, you can keep prices reasonable without having to stress about eventual competition.
5. Not changing management structures as growth occurs
The management and leadership structures that work well with a company of 50 people may not work at all with 250. Remember that scaling brings its own changes and challenges, and your leadership team has to be ready to adapt.
A flat structure that worked well when you were small may have to give way to a more defined leadership tree over time as your startup grows.
6. Ignoring issues that pop up
A founder that is scaling a business cannot afford to be blind to issues that pop up. Growth, especially if it happens quickly, takes almost everyone out of their comfort zone. There are bound to be personnel, personality and product issues along the way -- just to name just a few.
Don’t convince yourself that things are OK when they’re not, and don’t allow yourself to believe that things can’t change for the better. As a leader, you must be prepared to confront issues head on to avoid long-term damage to your company.
7. Forgetting that trimming fat is part of scaling
Some founders think that scaling only involves growing upward and outward. However, as your company grows, you may find things that no longer work, departments that are no longer needed, and staff members that don’t gel. Trimming back those items that aren’t working is an important part of building towards things that are. As you scale your business, don’t be afraid to trim fat so that your company can grow effectively.
Scaling a business is an important part of growth, but it’s easy to make mistakes. Avoiding these seven pitfalls will help your business scale successfully, bringing you the increased profits, growth and longevity you desire.
What do you think is the number-one pitfall most entrepreneurs run into when scaling a business? Share your thoughts in the comments section below!