As my partners and I were pursuing an aggressive growth strategy in our business my late father frequently reminded me, “The leading cause of business failure is success!”
We also got similar warnings from our banker, who said he always worried the most about his clients who were growing the fastest.
While we did not heed the warnings of these two mentors and grew much faster than we should have, we did survive. And along the way I learned a very important lesson about the challenge of managing growth.
The road to growth can be both narrow and treacherous. There is not a lot of room for error, and when you make a mistake it can lead to serious or even fatal consequences for the business.
There are two ditches alongside the road to growth.
One ditch is the one that catches those businesses that underestimate what they have to do to manage their growth. This is the ditch that most people worry about with fast growing businesses.
Entrepreneurs who end up in this ditch spend too much time continuing to be involved in the day-to-day operations of the business and not enough time working on creating an organization that can support growth.
These entrepreneurs move too slowly to build a team to whom they can begin to delegate important functions and tasks. As they add employees, they don’t create systems and procedures that make sure work gets done efficiently and effectively. They don’t think about what organizational structure will best support their strategy and achieve their goals. And they don’t take the time necessary to intentionally build the culture they want to have within their business.
Entrepreneurs who get caught in this ditch alienate customers with poor service and lose their best employees due to frustration with the constant internal chaos.
If failure is the ultimate result, it is not because of a poor product. It is due to poorly managed growth.
The other ditch is the one that catches those entrepreneurs who actually over-prepare for growth.
These entrepreneurs hire too many managers too quickly, added overhead expenses that the business is not yet ready to support.
They also make systems and procedures that are much more complicated than necessary, also adding to cost and bogging down employees and customers in excess complexity and paperwork.
Eventually it can seem like employees are serving the system, rather than the system supporting them and making their jobs more manageable. And even worse, customers can begin to feel like they are serving the company rather than the company serving them.
If failure is the ultimate result for entrepreneurs who end up in this ditch, it is due to over-managed growth that kills the innovation that made the business special and successful.
So what’s the best way to stay between these two ditches during growth? Moderation. Entrepreneurs need to be careful about how fast they allow their businesses to grow. And they need to balance the need for systems and structure with the need to keep the entrepreneurial spirit alive in their companies.