The 5 Biggest Bottlenecks That Will Keep Your Startup From Growing
Adidas is one of the biggest brands in the world, but even this giant isn't immune to growing pains. The company announced in March that it expected a sales slowdown during the first half of 2019 because its Asia-based suppliers had been lagging behind demand.
This supply chain issue was a particular blow because Adidas had doubled its performance in North America in recent years.
Yet growing pains are a common issue among expanding companies because of the difficulties of sustaining growth -- no matter what the company is or how big it is."
Instead, when you're a growing company, the key to sustaining growth is to anticipate bottlenecks before you accelerate. You have to start where you are: How do you use your existing team members, equipment and cash positions to maintain your current momentum? How do you use those resources to lay the foundation for a massive scale-up?
Having a plan for addressing bottlenecks is important because these problems don't go away if you ignore them. They simply get bigger.
Stalled production = death for young companies
I appreciate that for entrepreneurs, battling every problem that arises can feel like playing a game of Whac-A-Mole. But even Whac-A-Mole operates on patterns. I spent years mastering every aspect of hydraulic fracturing -- from laying pipe to overseeing production in two countries simultaneously. Taking low-producing wells up to 500 times their production from the day before was for me just a normal day's work.
We used technology to break through those bottlenecks in the process-manufacturing side.
Today, in my work overseeing 13 industrial verticals, I've learned that the operations side rarely takes the time to map out the process and examine how things flow. I've learned that there is a lot of value in data, and that by leveraging that information, I can have an immediate impact on my company's supply chain.
But not all entrepreneurs "get" these things. Often, they plow ahead despite obvious growth obstacles, assuming that they can throw money at the issues that arise as their company expands. In fact unresolved problems only beget more problems, and if you're an entrepreneur in this position, you can lose money if you lack a strategy for improving your output. Eventually, production will stall, and for young businesses that is a death sentence.
Rather, eliminating bottlenecks as you grow should be your top priority.
5 factors that create bottlenecks
Every company faces different challenges, but there are a few that crop up in every industry. Here’s what to look out for and how to deal with them:
1. Inefficient time management
Most entrepreneurs think on infinite time scales, as though they have eons to achieve their goals. Time is your most valuable resource, yet most leaders don’t use it effectively. You need to analyze your business flow metrics and identify time-wasting processes. Compare your performance with industry standards to find out where you fall. Then, leverage technology tools such as automation and machine learning wherever possible.
McKinsey & Co. reported that the next era of supply chain management will hinge on autonomous vehicles and a network of smart programs that can optimize efficiency. You can increase efficiency in your own organization by implementing software solutions that break through bottlenecks and boost productivity.
2. A lack of money
Inadequate funds -- and the resources they can buy -- can hinder expansion. When it comes to resolving bottlenecks, money talks. It enables you to pay for software programs and hire consultants who can reduce your obstacles to growth and profitability. As the company expands, you’ll need to scale your technology, invest in sales enablement and direct resources to a number of other critical areas. You’ll need money to achieve all of that.
Fortunately, there are a number of capital sources out there. In addition to venture capital funding, you can apply for a loan backed by the Small Business Administration. Loans repaid in less than seven years typically incur a less than 10 percent interest rate, and these loans can be used to purchase new technology or build out your team with supply chain experts.
3. Too much noise
Building and running a startup can become too complex when you're trying to cut through the noise generated through social media, marketing, apps and vendors. It’s enough to make entrepreneurs think they need to chase down the "next big thing" and clamor for the media limelight.
But limelight doesn’t guarantee success. Many companies that drew huge amounts of press and and venture funding have ultimately failed. Case in point: Jawbone, which raised $930 million and had plenty of market visibility before it sold off its assets.
The better path is to focus on the work and trust that attention will come. Put out a great product, and be rigorous about clearing your path to growth. The accolades will follow, but they matter only if you can scale and thrive sustainably.
4. A small (or nonexistent) network
Being a first-time entrepreneur with a near-nonexistent industry-specific Rolodex is one of the biggest challenges to overcome. A strong network is crucial to your company’s growth. In fact, research conducted by the Economist Intelligence Unit found that 78 percent of startups surveyed linked their success to their founders’ networks. But strong networks aren’t built through viral campaigns or flashy marketing. They develop over years through resilience, relationship-building and cultivation of a community around your idea.
To build a supportive network around your own business, think about the type of reach you want to have. Is your brand primarily local? If so, put down roots where you are, through partnerships and sponsorships with influencers in your region.
If you want to have global appeal, you need to attend conferences and reach out internationally to learn how to move into other markets. You must become relevant to the rest of the world.
5. Growing too much too soon
You can grow your production, but you'll grow your problems at the same rate. Figuring out how to scale requires frequent testing and a willingness to pivot -- you don’t want to miss out on strategic opportunities. For instance, there’s nothing wrong with starting small and growing slowly. It's better to take that approach than to overinvest in a lackluster strategy. Seventy percent of startups find scalability difficult, according to data published by Techstars; so you need to pay attention and switch gears when that's needed.
When Groupon started the concept of online couponing in 2008, it was a tremendous hit. But Groupon focused too much on customer acquisition and not enough on customer retention. So when the company rushed to scale, it hadn't dealt with its preexisting issues. Within months of filing its IPO in 2011, Groupon's share price plunged from $20 to $9.
As common as these issues are, startup founders are actually the biggest bottlenecks in their own businesses. They believe they have to do everything themselves, and they try to charge through problems on their way to growth.
Recognizing upfront that you will face bottlenecks makes you more aware of, and therefore better equipped to, mitigate them. It also increases your company’s chances of success. No business grows without a hitch, but those leaders who acknowledge problems at the outset are the ones with the best chance of watching their companies soar.