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Top business and career coaches from Forbes Coaches Council offer firsthand insights on leadership development & careers.
As an entrepreneur, it’s normal to get excited when your products or services are well-received. When your sales are up, you might immediately start scaling offerings, staff and even locations. However, this may be a premature decision.
It’s often difficult to recognize when you’re scaling your company too quickly, especially when you’re riding high on your recent successes. Below, 15 members of Forbes Coaches Council share some key signs that you may be expanding too quickly and how to correct course before it hurts your business.
1. You’re Not Meeting Your Success Metrics
Set time, volume and revenue thresholds for your company. Understand in advance what it would take for you to decide to change your plan before you have reached your goals, and put those requirements in writing. Knowing in advance what success looks like for you and for your product or service will help prevent you from feeling like you are more successful than you actually are. – Erica McCurdy, McCurdy Life Coach
2. Your Outflow And Profit Margin Ratios Are Off
Because startups don’t have a historical comparison and fads can fade, it’s important to follow management-by-statistics formulas to prevent applying the wrong steps at the wrong time. You are expanding too quickly if the outflow and profit margins start to go out of a normal ratio. To correct, evaluate and cap salaries of nonproduction positions until delivery and sales are streamlined. – Tracy Repchuk
3. Your Projections Are Based Solely On Early Adopters
Rapid sales of a new service or product often come from early adopters. This is a subset of your customer base; they are easy to appeal to because they are motivated to be an early adopter. However, these results can skew projections, as the timeline for attracting customers toward the top of the adoption curve can take increasing amounts of time and resources. Establish stability, then scale. – Kyle Brost, Spark Policy Institute & Choice Strategy Group
4. Your Team Is Burning Out
Growing is always a goal, but what happens when you scale too fast? You overload the team and get burnout. Check in with your team to make sure the systems and people in place can handle the workload before you blindly take on more than you can handle. Get a system checklist in place to make sure the one thing that doesn’t break is you! – John Livesay, The Pitch Whisperer
5. You’re Making Decisions Without Real-Time Financial Data
This is the most dangerous phase in a business’ life cycle, so it would pay to balance your well-deserved excitement with some humility. Blind growth can be one of the fastest paths to destruction. To make sound decisions regarding your growth strategy, you need impeccable real-time financial optics. This may be a good time to invest in an experienced CFO and start building solid business processes. – Mehrdad Moayedzadeh, Life Is Important
6. You’re Scaling Before You’ve Achieved Consistent Profitability
Unless they have an angel investor who’s willing to take on all the risk of scaling too fast, entrepreneurs need to attain consistent profitability before expanding. Adopting a “profit first” model (see the book Profit First by Mike Michalowicz) will help a startup scale smartly and avoid the unnecessary expense and debt traps that can come with growing too fast. – Christine Rose, Christine Rose Coaching & Consulting
7. You’re Buying Into Your Own Hype
Many business owners struggle with awareness and being vulnerable. It’s difficult to be brutally honest with ourselves, and we can easily get caught up in the hype of our growing business. Allow your customers and market to determine the hype while you play the role of devil’s advocate. If you find yourself off course, be intentional and correct quickly! Be aware, be vulnerable and be intentional. – Brian Bogert, The Brian Bogert Companies, LLC
8. You Don’t Have A Reserve Of Liquid Capital Yet
Before a company can truly start to scale, the most important thing is to make sure that sales are always coming in the door. By ensuring your sales forecasts have a high probability of closing and working the plan you’ve created and forecasted at least 12 to 18 months out, you’ll create a set of reserves to keep your liquid capital before you start to expand. – Jon Dwoskin, The Jon Dwoskin Experience
9. You Hired More People But Aren’t Seeing A Change In Profit
Too often, leaders simply grow their team and wonder why the profit margin did not change. To scale, you must determine your best practices, then use them to achieve higher levels of success with less effort. Scaling is about doing more while working less—increasing efficiency and effectiveness exponentially while adding resources incrementally. – Chris Stricklin, Dunn University
10. You’re Over Capacity
Capacity dictates scalability. When a company or leader is at 80% capacity, then it is an appropriate time to scale. When organizations or leaders are over capacity, then the company is scaling too quickly. Overcapacity is dangerous for organizations. Capacity can be measured in view of time, resources, people and communication. Lack of scaling properly will not be sustained. – Ken Gosnell, CEO Experience
11. You’re Trying To Scale Everything At Once
When startups scale too big and too soon, it diverts attention, resources and funds away from what made them successful in the first place. If entrepreneurs are more patient and play the long game, they can scale in stages by taking what’s working well and expanding that to certain thresholds. Each scale should be a self-sustaining profitable ecosystem. If it’s not, then sort it before scaling. – Gabriella Goddard, Brainsparker Leadership Academy
12. You Have To Compromise Customer Experience In Order To Scale
The Eiffel Tower wasn’t built on a weak foundation. Scaling too soon can cost the company its integrity by not delivering the experience the consumer expects. This can result in the loss of trust in the company and, ultimately, loss of revenue. If the startup has not worked with an experienced professional on a business plan to ensure their success isn’t quick-lived, getting a plan in place is vital. – Jennifer Armstrong, So Simple – Life & Business Coaching
13. You Don’t Have An Onboarding Process In Place Yet
Without proper onboarding and mentoring programs, you risk more than you might think. Scaling is exciting, and you have to keep your employees delivering on your promises. Scaling too quickly, without thought for mentorship and training, can dilute the values you need to deliver to make clients happy and to follow through on your brand promises. Make sure onboarding covers your core values and your promises. – John M. O’Connor, Career Pro Inc.
14. You’re Making Emotional Decisions Without Any Outside Input
When emotion trumps logic, you’re in trouble. Establish an independent board of advisors and run your expansion ideas by them. Ask them to challenge you. Listen to their ideas without getting defensive. Their more sober assessments can help derail any of your well-meaning but emotionally fueled decisions to expand. If needed, correct course by taking lesser losses now to avoid bigger losses later. – Gary Bradt, Bradt Leadership, Inc.
15. You’re Forcing It
Instead of crafting a plan to aggressively scale a business, “go with the flow.” Scaling is a way to serve more customers better. Do not force it. If you scale too fast, before you are ready, you run the risk of stretching your resources too thin and putting the health of your business at risk. Scaling isn’t the end goal; it’s a means to create a solid, strong and sustainable business. Take it easy. – Mari Carmen Pizarro, Whole Leadership SystemsF
Forbes Coaches Council is an invitation-only, fee-based organization comprised of leading business coaches and career coaches. Find out if you qualify at forbescoachescouncil.com/qualify. Questions about an article? Email [email protected].