5 Risks of Expanding Too Fast

March 27, 2017

Few successful entrepreneurs will start a business, take on a couple of staff, and then lose all aspirations to expand. True entrepreneurs are hungry, often impatient about meeting new targets, and will set themselves tough goals to reach a certain level by the end of the year.

It may seem like a self-defeating concept, but it’s important to recognise that sometimes rapid expansion can be a damaging force. When a potential new partner or investor asks for your company’s growth rates and timelines, they aren’t simply trying to detect how impressive your numbers are; they’re checking for red flags, and whether your growth rate is so fast that, rather than becoming a success, your business is more likely to crash and burn.

In the early days of a business, a single new customer can potentially enlarge the company by 100% or even 200%. Maintaining such astronomical growth is unlikely to be stable or sustainable, so I would consider a “consistent” growth rate to resemble maybe 20% per year, ongoing. This, of course, will differ from industry to industry, business to business, entrepreneur to entrepreneur.

One thing that is certain is that a company is unlikely to be a success if it continues to expand exponentially – so what problems do you risk if you grow or develop your business faster than you can handle?

1.  Making customers unhappy

In any business, the customers’ needs and desires are most important. If you fail to satisfy their needs you are missing out on what should be your highest priority.

Losing touch with your customer base can be the result of sloppiness by taking on too many tasks during a busy period, or attempting to take on too large a venture for your current means or level of experience. For example, if you successfully sell and deliver 1,000 books, congratulations: that scale is at the limit of your understanding when it comes to selling and delivering books. There is no use assuming that selling 10,000 books will give you a similar experience, or believing that you are capable of packing and selling them so long as you work 10 times harder. With this kind of attitude, you put your reputation dangerously on the line.

Each level of growth for your business will be different to the last, in the 21st century world of online forums, social media and review sites, it only takes a handful of dissatisfied customers to sour your company’s good name for good.

Bear this in mind: many entrepreneur’s stories suggest that the noise of an unhappy customer is 3-4 times louder than a happy one.

2. Taking on large costs

The problem of taking on large costs can be illustrated in one particular entrepreneurial story.

For about 3 years in a row, Mark Homer and I used to hold a property event called the Progressive Property Super Conference, which was the largest conference of its kind in the UK. We held one at Chelsea Football Club and at that time it was probably our biggest ever, with maybe 800 people turning up.

During the build-up, we were burning through cash at a faster rate than we were making it – which is often the case when, as a successful entrepreneur, you are spending your time focusing on an upcoming event rather than aiming to take on more clients and fulfilling your most lucrative tasks. We reached the point where we had perhaps 6 weeks’ worth of money left to keep us going, and if that had vanished, we’d have been left with nothing at all.

We managed to get away with that but it was a nerve-wracking, adrenaline-fuelled experience that taught me the risks of taking on too much too early. A few more weeks and we could have gone bust.

3. Overworking yourself, your partners, or your employees

Burning yourself or your contacts out is a very real risk for any business at any time, but particularly when you are expanding at a serious pace. When it comes to you personally, it is your health and your ability to do your job well that are at stake. For your partners, you risk resentment, a poor business relationship, and failing to nurture the possibility for joint ventures in the future. For your employees, you risk losing your best staff.

While pressing forwards with a workload that is too large, even with the intention of getting past one single tough period, you are risking your health, your contacts, and the very future of your business.

4. Failing to systemise new challenges

Accelerating when you should be systemising and learning each vital stage of a new process will leave you vulnerable to mistakes and failure. Whenever you take on a new challenge or embark on a new opportunity, it is essential to digest and understand each phase so that you can improve upon them next time around. The same can be said of failing to prepare for a new opportunity.

One entrepreneur’s story that comes to mind was when a business partner of mine set up a webinar for 3,500 people using a higher level programme to allow for such a high attendance volume. If he had taken the time to prepare and learn the new system thoroughly before the all-important webinar, he would have known that unlike the previous programme he had used, he was timed-out after 90 minutes, which was just as he was about to go to sale. Instead of making a couple of hundred grand he left with next to nothing, simply because he hadn’t tested the new system thoroughly enough.

5. Making poor hiring choices

When your business rapidly expands, you are going to have to make rapid choices about who to hire. This, however, doesn’t mean that you should be making rushed choices!

It is a difficult balance to strike, hiring quickly but ensuring that you have found the right employees. You can advertise via websites such as Indeed and monster.co.uk, you can go through a recruitment firm, or, better yet, you can use your contacts to find the most suitable candidates with the best reputations amongst those you respect most. Talk to both contacts online and those you have met during meetups and professionally, as well as mentors and business partners. Cast the net wide and then zoom in to those who will serve you best and most reliably.

Leveraging the tasks that you don’t have the time or the inclination to do is one of the most important strategies for any successful entrepreneur, so it is worth dedicating the time to the task that it deserves.

While these are perhaps the top risks, there are of course many other entrepreneurial stories and problems you should consider that can arise from expanding or moving forwards too quickly. You can create debts that will haunt your future, you can forget the reasons that brought you to the business in the first place, you can focus on the short-term and lose sight of what lies in your future, and you can fail to balance the focus areas that should be most important in your company.

What are the most significant risks you fear or have encountered due to expanding too quickly? What measures do you take to avoid them?

If you would like to learn about how to make those essential decisions more quickly, listen to this recent podcast about how to make faster decisions

You might also like to read my book Life Leverage, which is packed with other entrepreneur’s stories, which you can find here

Rob Moore

Rob Moore

The Disruptive Entrepreneur, business of the year winner 2016, has broken three world records. 5x best selling author including 'Life Leverage', property investor, pilot & proud parent
"If you don't risk anything, you risk everything"
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