7 Growth Pitfalls Your Business Should Avoid
For any small business owner, one of the top goals is to eventually grow. Whether this means bringing in more clients, branching into new markets, or operating with a team of hundreds of employees, the process is the same. Unfortunately, too many businesses never make it to the next growth phase, sometimes as a result of mistakes they make while trying to get to the next level.
If you’re planning to take steps to grow your business, it’s time to stop and carefully plan out what you’re doing. Here are seven major pitfalls you could experience as you attempt to grow.
Lack of Funds
If you want to continue to thrive as a business, you’ll need to have the funds in place to finance your operations. Whether this means landing a round of investment dollars, taking out a small business loan, or simply bringing in enough revenue for your work to pay the bills, it’s important to have the budget to support what you’re doing. The biggest mistake you can make is in growing so fast, you have more money going out than coming in. For that reason, you’ll likely need to set aside cash reserves for months before taking that next step.
For any business, a detailed monthly budget is crucial. This budget should be refined as your business progresses based on real data. Over time, you’ll develop an intimate knowledge of the inner workings of your operations and this will put you in the position to make decisions about how many expenses your business can handle. If you aren’t good with finances, one of the best investments you can make is in a skilled bookkeeper or accountant who can help you get an expert view of what your budget can withstand.
Adding New Staff Too Soon
In the early days, a business owner is expected to handle everything. This means interacting with clients, dealing with day-to-day administrative functions, and making decisions about the general direction of the business. As the hours get longer and you begin to feel overtasked, it can be tempting to start adding employees. Once you’ve taken on this commitment, though, it’s difficult to reverse it. You’ll be responsible for paying monthly wages and benefits on each worker on a permanent basis, with the only alternative being to dismiss the employee.
Instead, consider outsourcing the work you need done to freelancers or contractors. This will allow you to offload some of the work without committing to a monthly expense. You’ll merely get the task completed, pay the worker, and move on. If you want to hire someone again, you can either contact the same worker or choose someone new.
Expanding Too Quickly
When a business is doing well, it can be tempting to add new offices in order to reach new markets. This means an additional monthly lease for the new space, as well as the expense of new workers to staff those new locations. While this can mean additional revenue for your business, too often these new customers aren’t enough to offset the new operational costs. Businesses should thoroughly test a market and be as strategic as possible about expansion to avoid having offices in area where the market can’t support them.
For product-based businesses, overexpansion can sometimes mean adding new products. These products may not even be within a business’s existing specialty area. As important as it is to meet customer demand, it’s also important to avoid growing your product line in a way that confuses customers. Know your brand image and your customer base and add new products strategically.
Poor Hiring Decisions
As important as it is to know when to hire a new employee, it’s even more important to hire the right one. Failure to properly interview and screen candidates during the interview process can have a devastating impact. Before you hire, take time to study the market and know exactly the skillset you need and pay range you should offer. If the position is outside of your area of expertise, consider working with a recruiter who specializes in that area. The small fee you’ll pay for the service will be well worth it if you avoid a misfire.
When you hire the wrong person, you add a huge expense to your business’s bottom line. You’ll deal with months of productivity lag, potential alienation to your customer base, and the risk of theft. If you go through a stack of candidates and no one stands out as perfect, start the process over again. Hiring the best of a group of so-so options will only lead to regret in the end.
Ignoring the Competition
In growing and maintaining your business, it can be all too easy to develop tunnel vision. It’s important to keep an eye on the competition at all times. When you stop watching, a competitor sweeps in and wins your customers away, either through providing better products and services or by undercutting your prices.
As you grow, make a point of consistently checking in on your competition. Monitor their prices and set up alerts to let you know whenever something is posted online about your business or any of your direct competitors. Learn to recognize when other businesses are offering something more valuable to customers and redirect your efforts quickly in response.
Failing to Prepare
Planning is everything as you grow, but you should also be planning for the worst-case scenario. What would happen if a natural disaster wiped out your office building? What if you suddenly lost your top client? What if a server crash took all of your valuable data? Do you have a plan in place for each of those scenarios?
Draw up a disaster recovery plan that takes into account each of the items that could befall your business. In the course of creating this plan, you should also set up a situation where work could continue no matter what happened. If you lost a major source of income, you should have a backup plan to get you through until you can land another big deal, whether it’s through relying on money you’ve set aside or calling upon a line of credit you always have in place, waiting.
Poor Online Presence
No matter what type of product or service your business provides, you should have a strong website. Today’s customers go online to research things before beginning the shopping process and if you don’t have a website or online store, you’ll lose out to a company that does. If you sell products, set up an online store so customers can order your items and ship them. Even a small specialty shop can benefit from local customers and tourists who order items online and have them shipped to remote locations.
In addition to your website, you should focus on setting up a profile for your business on each of the social media sites your customers are likely to use. Additionally, you should seek out community forums like local Facebook groups and maintain a presence on those sites. Try to boost your profile on sites like Yelp and Angie’s List, since local customers will often rely heavily on those sites for recommendations.
Moving to the next phase of growth is exciting for any business. However, when entrepreneurs are overeager, they can sabotage themselves by growing too quickly. By following these guidelines, hopefully you’ll be able to grow your business without ensuring its demise.