Rapid growth isn’t all it’s cracked up to be. But try telling that to ambitious small business owners. According to 2022 Guidant research, leaders at small companies have scaling on their minds. This year, 51% of small business owners want to add more employees, and 41% are aiming to expand or remodel. The problem is that bigger isn’t always better for businesses. Sometimes, it’s best to take the more stable, scenic route to the top.
What are the risks of expanding rapidly before you have a strong foundation in place? One major issue is the burden it puts on your staff members. Employees often feel the stress when their companies go into overdrive mode. This leaves them facing potential burnout—and maybe more eager to join the Great Resignation.
Another problem with too-fast growth can be a decrease in customer service. Let’s say you go from 100 to 200 clients in three months. On paper, that seems exciting. But what does doubling your client base look like in real life? Do you have the tools, processes, and people to maintain world-class support for each client? Or will your reputation take a turn for the worse as your service falls apart?
A final—and financial—conundrum many leaders don’t anticipate is how costly expanding operations can be. It can take a lot of upfront cash to accelerate growth. Frequently, leaders end up having to make sudden fiscal decisions that leave their funds depleted. For instance, rapid expansion could necessitate totally new expenses. Those expenses could cause profit margins to evaporate.
This doesn’t mean you shouldn’t consider going big. You just need to ask yourself the following questions to ensure that it’s your best move:
1. Will you and your team feel comfortable taking on more work?
There’s a lot to be said for being pragmatic in terms of feeling safe to scale up. Staying small for a while longer could be a wiser strategy, particularly if everyone on your team is overextended. Until you get more help from new employees or contractors, you might want to stay the course instead of stepping on the gas.
Of course, as a leader, you might be nagged by the notion that you have to constantly strive to do more and be better. Alison Gutterman, CEO of Jelmar, the family-owned cleaning products manufacturer of CLR and Tarn-X products, talks about the need to keep it real when determining the limitations of your reach.
At the same time, she advises not underestimating what’s possible even if you don’t take on more staff. “Whenever I speak in public, whether in focus groups, at leadership conferences, or in front of students, I explain where I sell our products and who our competitors are,” she says. “I then ask the audience to guess how many people work at the company. I always get a wide variety of answers, from a million people (a fourth grade student) to hundreds or thousands of people. People are shocked to know we are a staff of 20 people, which we just reached this year. Whether it’s customers we sell to for retail, an industrial customer, or an actual user of our products, people are impressed we can do so much with a small team.”
Contemplate what “enough” looks like for your company. What’s reasonable? How much room do your team members have to push at the edges of opportunities? You might find that eating the pie one bite at a time allows you to scale steadily without unnecessary growing pains.
2. What does your budget look like?
As mentioned before, you can’t grow fast if you don’t have a good handle on your budget. Tripling your workforce won’t necessarily triple your revenue, for example. It’ll give you more people on the payroll but not necessarily do anything good for your bottom line.
Explore your budget carefully. Streamlining before you enact a growth strategy gets everyone into a lean working mindset. Lean growth is more sustainable in the long run because it values keeping your finances in check every step of the way.
Your finance department is a great area to start if you’re trying to get lean ahead of planned growth. Garter research estimates that businesses can save thousands of hours annually by automating some of their finance-related practices and tasks. One bot can displace up to 30 times the work of one human full-time equivalent employee. And that’s just the beginning. Automated systems can shave time and reduce human error in almost every area of your business.
In time, you might discover that adopting lean principles could increase your profits without growth. In that case, you might still get more without having to incur additional costs.
3. Do you see your future as the forever leader of a startup culture?
Many businesses that keep scaling year after year take on startup cultures. Employees are constantly striving toward the next best thing, and disruption is the norm. It’s fast-paced and can seem attractive—unless consistency is what you’re after.
Picture yourself and your employees in the next year or so. Would you be happier in an environment that’s forever reshaping itself? Or would you appreciate the chance to know that your company is doing well and humming along effectively?
Traditionally, founders put in far more hours each week than other business leaders. One-third of small business owners report working more than 50 hours per week, while one-quarter work more than 60 hours. Maybe that’s fine for you. If it’s not, though, you might want to opt for slower growth.
Spend time mapping out the future for you and your business. Be thorough. Unless you want to dominate your industry as soon as possible or sell the company within a year or two, you might prefer the security that comes when your growth is slower and steadier.
Small companies that rapidly zoom to the top of the charts might seem great on paper. However, they risk burning out like hot stars. Often, it’s more prudent and profitable to eschew fast flash in favor of thoughtful expansion.