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Are You Scaling Your Startup Too Quickly: 5 Key Warning Signs

There's a myth in the startup community that says you need to scale fast. In today's guest post, Jock Purtle, Founder and CEO of Digital Exits, takes a look at why most startups yield greater benefits from steady growth rather than rapid expansion.

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Guest Author: Jock Purtle, Founder and CEO, Digital Exits

Growth is the ultimate goal for any startup. While it’s fun to be the new kid on the block, eventually you want to expand beyond this and become a permanent fixture in the industry.

But just because growth is the goal, it doesn’t mean it needs to happen overnight. In fact, for most startups, slow, steady growth is going to be far more beneficial than rapid expansions. And growing too fast can actually end up putting you out of business.

To prevent this from happening, keep an eye out for these five warning signs:

  • 1. You’re Hiring Someone for Everything

Hiring new people is part of growth. As your volume expands, you need more people to help you manage it and keep the company growing. But hiring new people is very expensive, and often times, especially in the early stages of a startup, there are ways for you to better use your resources.

For example, you could redistribute work in a more efficient manner, combining roles so that there is less of a need for more people. Or, you could outsource or automate some functions. For example, you could use a professional employer organization instead of expanding your HR team, allowing you to keep your team small without sacrificing quality.

But finding and implementing these solutions takes time, so rapidly-growing startups often bypass them in favor of expanding the team; it ends up being easier to just hire someone than to make the effort of exploring other options, even if they may be better for your business. Yet if you’re not careful, this strategy can get you in big trouble. So, if it feels like you’re constantly bringing in new people to help you manage growth, take this as a sign you may be growing too fast.

  • 2. Cost of Infrastructure (and everything else) Outweighs Revenue

When you grow too quickly—and this is especially true for tech startups—your infrastructure and overhead costs balloon. So while you might be pushing more volume, the money you need to spend to keep up with this expansion jeopardizes the health of your company.

Some startups have investors to help them through these periods, but many do not, meaning slow, steady growth is the much better option.

  • 3. You’ve Literally Run out of Room

This one is a quite visual sign things are moving too quickly. While it’s likely you have a good deal of remote workers, there will always be a place for an office. And if all of a sudden you find people working from coffee tables or temporary desks, or if they are using their own equipment, then things are moving too quickly. Consider taking a step back to see if you can manage growth a bit better and make it more sustainable.

  • 4. Customer Complaints are On the Rise

One of the key advantages of being a startup is that you can often give people a much better customer experience than the big guys. Perhaps it’s because of your innovate solutions, t that you have less clients and can therefore spend more time with each one, but no matter the reason, it’s this increased attention that helps set you apart.

You should always be keeping track of what your customers think of you, and if you notice an uptick in complaints, you’re probably growing too quickly. During periods of expansion, startups tend to sacrifice quality for quantity, and this hurts efficiency and the customer experience. If you notice a decrease in customer satisfaction, then it might be time to consider strategies to help you better manage growth.

  • 5. Employee Morale Begins to Dip

Most people like working for startups. The spontaneous nature of the work means people need to wear many different hats. This, plus the feeling of being at the beginning of something, usually results in high employee morale for startups.

Yet everyone has their limits. As you grow, you’ll start to expect more from people. And if you push this too far, your employees will get overworked, making them less happy and less productive, and perhaps more likely to leave in search for something better. Make sure to keep a close eye on employee morale, and if you see it dip, consider you might be growing too fast.

 Plan for Sustainable Growth

If you find you’re already growing too fast, though, there isn’t much you can do—it’s not like you can stop growth. But you’ll need to act fast to maximize efficiency and keep costs down. Consider outsourcing and automation, and try to find ways to improve your processes. This will help keep costs down and make it easier to manage growth. However, the best strategy is really to be proactive. Plan to grow slowly and steadily, and hopefully you’ll never find yourself in over your head. 

The opinions expressed here by 1871 guest writers are their own, not those of 1871. To learn more about Digital Exits follow this link.

Topics: Insights

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