Growth is usually seen as an unalloyed good, like money or French cheese. But that’s not what Ed Hess, the author of a Growing an Entrepreneurial Business: Concepts & Cases and a professor at the University of Virginia’s Darden Graduate School of Business, thinks about it. “Growth can be good, and growth can be bad. Growth can create value, and growth can destroy value. Growth is like Mother Nature – she can be very, very good, and she can be very, very destructive. Respect her.”
His book, which studied 54 American high-growth private companies that averaged 9.6 years of existence with average revenue of US$60 million (which ranged from $5 million to $350 million), revealed that there are a few key ways that successful companies can harness growth – and some common mistakes that the less successful ones tend to make. When it comes to that critical next step, here’s how to avoid tripping over your own feet.
Scale it Up
Turning a small business into a not-so-small business is all about scaling up your operations. But to do that, you need to make sure that you have the right systems and processes in place in order to handle the additional business. And you need to make smart, forward-looking investments, because failing to build out the necessary capacity – or building out too much of it – can be fatal. “Focus on what you need to do to be able to handle the growth from a process and systems perspective,” Hess says. “And also, ask yourself: how much growth can you afford? Many times, growth means putting money out way ahead of when you get it in. Most people who make the mistakes take on all the growth they can, and they end up having quality problems and financial problems.”
It used to be that you could learn by trial and error without the entire process showing up in the form of an embarrassing YouTube video or angry customer complaint on Yelp. But, then again, it also used to be that you could smoke in hospitals and make phone calls from a payphone. It’s 2013, and that means you have to expect that your business will, in due course, become everyone else’s. “Take on only as much as you know you can do well,” Hess says, “because in today’s world with the Internet if you have quality problems, everyone’s going to know it. If you have employee problems, everyone’s going to know it. The business world has become very transparent.”
Slow It Down
When it comes to growing, slow and steady really can win the race. Too much, too soon usually ends up in a situation where some – your customers, your suppliers, maybe even your own employees – get too little, too late. Hess recommends what he calls a “gas pedal approach,” one in which you ease into your growth rather than trying to floor it. “Don’t grow too fast in size, and take on more than you can handle,” he says. “Respect the fact that growth can destroy value as easily as it can create value.”
Here’s the good news: you’re not the only one taking the next step. Yes, your business might be unique (although let’s be honest: it probably isn’t), but the challenges you face aren’t so different from those of another entrepreneur in a similar field with a business that’s the same size as yours. And as Hess advises, you’d be a fool not to take advantage of the opportunity that presents. “There’s no reason to reinvent the wheel. Learn from other people’s mistakes. There’s great value in reading, there’s great value in having mentors and there’s great value in being part of an entrepreneur group where you can listen to how other people solve problems. You don’t have to go it alone.”