10 reasons why growth can derail a startup
Startups want growth, they are very rarely profitable in the early stages and the only path to profit is through growth. However, growth can be a double-edged sword and can be the death of a startup as much as its success. Here are 10 reasons why growth can cause issues for a startup.
Hiring too much too fast – Growth will require you to hire new people, but you need the right people and not just warm bodies. Hiring the wrong people will hurt you more than helping you and add to your ongoing costs without benefit. Always aim to be leaner with staffing.
Poor focus – Unfocused founders and unfocused teams will struggle when faced with rapid growth. Scaling adds pressure to the decision-making process and teams need to be able to manage this.
Too much growth – Startups that grow too quickly or start scaling too soon do so before they are ready. If you haven’t achieved product-market fit you may be trying to scale a bad product or into an unsuitable market. Growing too quickly without established scalable processes causes issues as well.
Lack of long-term goals – Startups need long-term goals that encourage them to stay focused during periods of volatility.
Trying to please everyone – Your product should be built to suit a whole market, not a single customer. This means you will have to say to some requests for product features or customisations so you maintain a broad appeal.
The wrong marketing – You need to market the right amounts at the right times through the right channels to maintain growth. Diversify your marketing where you can and avoid too much growth coming from a single channel.
Delaying fundraising – You can’t scale without cash. Don’t delay fundraising if you need the cash. Running out of cash is sure to stop your growth in its tracks.
Micromanaging – As you scale founders need to manage less and lead more. Founders won’t have time to do all the functional things they used to and will need to delegate and have trust in others to do the work.
Lack of Flexibility – Your strategy is important and you should stick to it wherever possible, but if changing circumstances justify a change then don’t be afraid to take it. Not being agile will hurt you just as much as being rigid.
Poor Systems – Scalable businesses should be as systemised as possible. Processes should be well established, documented and repeatable.
TAKEAWAY: Startups need growth to scale and achieve their vision. However, founders should be cautious and treat high growth with the respect it deserves as it can be just as much a hindrance as it is a help.