5 Mistakes Startups Make When They Grow Too Fast

Believe it or not, it’s possible for startups to grow too fast. Fast and premature growth can easily hurt a business that isn’t prepared to handle that level of growth. However, this isn’t an uncommon issue for startups who suddenly receive investor money. In the beginning, this can feel like a great win: after all, startups work diligently to create a product or service that will attract investors and help accelerate growth. Yet too much money with no clear plan can ultimately be a business’s demise. Here’s mistakes you should be careful to avoid as your startup explores growth:

Unable to Track Finances

When you suddenly have too much money, that successive growth could thwart your ability to understand proper pacing and scaling. As a smaller business, it’s easier to have a thorough, accurate understanding of where the money is and where it’s going. Going from lean, budget startup to a company with millions could make it difficult to monitor your cash flow and properly see where each dollar is going.

Once millions are involved, you might find it difficult to gauge expenses vs. sales. To avoid this, you should have staff accounts on hand to provide accurate, high-level estimates about how to realistically handle funds and break down how many is being spent and coming in. Without an accountant and properly planning, you could make bad business-breaking cash flow could cripple or ruin your business completely.

Too Much Pressure on the Team

No matter how big or small your company is, company culture should be at the top of your priority list. Growing too fast could cause business owners to overwork their employees, and put too much pressure on them to grow fast and repay investors. Productivity is linked with happiness, and if your employees are not happy, they won’t be able to perform well for you.

Stick to realistic goals rather than aggressive goals, and refrain from creating toxic environment where employees feel they have to meet unrealistic goals in order to maintain their jobs or compete with other members of the team. The same close-knit environment that startups have in their early days should be implemented when you grow, too. As such, start to brainstorm ways you can enhance company culture, even during major growth spurts.

Forgetting About Customer Service

Smaller businesses pride themselves in their ability to build loyalty and offer personalized customer service experiences. During earlier stages, sales teams are often willing to go the extra mile to acquire a customer. Businesses with new money can tend to focus more on getting additional sales than cultivating their current customer base by offering unparalleled service.

It’s much harder and more expensive to acquire new customers than to maintain your existing customers. If you plan of expanding your sales team, your customer service team needs to be equally as large to meet the demand. As a startup business, you’re also not only looking for people who can provide great customer service, but who can be innovative and challenge themselves to think of new ways to service those customers. Always have a strategy in place to build upon the people who are already making your company a priority in their purchasing decisions.

Making Bad Hiring Decisions

To accommodate for the growth you expect with newfound money, naturally you’ll want to expand your team. As such, it’s easy to forget how careful you were when you were in your early, cash-strapped stages; you had to use your money very wisely, and took the time to hire the right people. When companies want to build quickly, they can hire too quickly. This can lead to making bad hiring decisions. Instead of rushing to generate revenue quickly, take the time to hire people who are passionate and have the most relevant skills to the business.

Not Scaling Technology Efficiently

In today’s business world, technology plays a critical role in ensuring a company runs smoothly. Cloud based applications like project management software (Asana, Trello, etc) make it easy for you to access projects and progress from any device. Customer relationship management systems like Salesforce help you keep track of each customer and client to ensure the best possible service and to make marketing much more data-drive. Leave management solutions (like those offered at Reed Group, https://reedgroup.com/leave-management-solutions/) allow to properly keep track of your employees’ time off, which keeps the office running smoothly sans confusion.

Use technology to your advantage, and wherever possible, use systems designed with your industry in mind. For example, some CRM systems are designed especially for companies in the hospitality industry.