The 4 Biggest Mistakes Companies Make When Scaling Their Business Find out how to avoid them.
By Scott Duffy
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The following excerpt is from Scott Duffy's book Breakthrough. Buy it now from Amazon | Barnes & Noble | iBooks | IndieBound
When you work with as many entrepreneurs as I do, you see the same patterns in terms of mistakes that owners make once they are starting to grow and scale. Once a business gets past the initial stages—which come with their own set of mistakes—it moves into a new phase, which is growing and expanding what you've worked so hard to launch. As is always the case, a new phase in business, like in life, comes with its share of missteps, and I see owners and CEOs making them time and time again when scaling a business. The following are the most common mistakes companies make during the growth and scale periods, and how to avoid them.
Refusing to hire a new team to replace original employees
The people who got you this far may not be the ones who can take you where you need to go next. When we start a business, we are juggling a ton of responsibilities. We're typically cash constrained, which forces us to hire lower-cost generalists to help us. They don't necessarily excel in one area of the business, but they are good enough and flexible enough to help wherever we need it. But as the business becomes more mature and we approach a period of growth and scale, it's important to bring in specialists to run each department, such as a head of sales, marketing, or technology. It's also important to bring in people who have previous experience taking a company where we want ours to go. For example, if you want to build a company that does $10 million in sales per year, you need to hire a head of sales who has taken a company near your size and grown it beyond your $10 million target.
The problem is that often entrepreneurs feel loyalty to those who joined their business prelaunch and fought through early battles together. They tend to hold on to them for too long, stick them in the wrong roles, and hope they will succeed. It takes a very different type of person to run companies with 10, 20, 50, 100, or 200 people. So the number-one job of an entrepreneur, at every stage in business, is to make sure she has the right people in the right roles at the right time.
Related: 8 of the Biggest Mistakes Entrepreneurs Make When Presenting to Investors
Not understanding the economic drivers of your business
One very common mistake for entrepreneurs at this stage is that they don't understand the numbers behind what is truly driving the business. So they don't make decisions based on data and wind up investing in areas that don't make the most business and economic sense. This is an especially common mistake for companies that are overcapitalized. They overspend. So it's crucial to slow down, make sure you have identified a true product/market fit that makes economic sense and a proven system for acquiring customers, and then decide to invest in scaling.
Being stuck to the product road map
It is very common for entrepreneurs to get past the launch phase and be stuck in their own business product cycle. We'll discuss how to avoid this below.
Related: 5 Lessons to Follow as You Take Your Product to Market
Focusing on the wrong opportunities for growth
This occurs for one of two reasons. The first one we mentioned above: not understanding the economic drivers of your business. The second is being stuck to the product road map. Our team makes a list of what it will build next, prioritized and placed in order. But sometimes we get so caught up and wed to the road map that we forget to listen to the customers. As a result, we launch what we want instead of what they need. When preparing to scale, focus on data, feedback, and what your paying customers are telling you they want most. Build a product road map around their wants and needs.
Finally, we run into companies that do a great job getting to market, build great products, and have momentum. However, they are not sure how to take what they have and scale quickly. They get tunnel vision and can't wrap their heads around how to increase lead flow, profits, and valuation. We'll talk more about valuation shortly.
