In many ways, rapid growth is the dream for startups and entrepreneurs looking to make a name for themselves. It’s the time at which your company takes off. The hard work, in the beginning, begins to result in significant new revenue, and the foundation for long-term success in the market place is laid.
That sounds like the holy grail of running your company.
At the same time, rapid growth businesses are not magic or easy to build. You have to avoid running into them blindly. There are a lot of statements — both good and bad — floating around about growing businesses quickly with rapid or hypergrowth strategies.
Fortunately, all it takes is some myth busting to get you started. We frequently see these 8 statements about rapid growth businesses. Let’s examine each of them, along with a reality check.
Rapid growth is a goal for many startups, so it’s easy to see it as the end goal to reach. There’s a misconception that once your company begins to grow, you will be able to sit back and enjoy the fruits of your hard labor.
You feel a sense of security thinking that your company has hit a comfortable plateau. You are safe and secure in the knowledge that the growth is sustainable, and you’ve carved out your long-term niche in the market.
Rapid growth is never an end in itself. At some point, it will level off. Your best case scenario is for that leveling to happen on a steady S-curve, leading to maturity with a sustainable market share. For many businesses, even that can be difficult to achieve.
The unfortunate reality is that rapid growth also tends to introduce growing pains that many business owners fail to prepare for ahead of time.
A few wrong hires here and budget decisions there can actually lead to trouble far greater than just the end of the S-curve. If you’re not prepared for these side-effects, they can harm your business, your company’s reputation, and even threaten your long-term survival.
Hearing that rapid growth firms tend to fail may sound negative. Let’s examine another related, but similarly common, myth.
Cautious business owners frequently shy away from growing too fast. They believe that the revenue and scalability crunch is too much to bear, and will almost definitely harm their business in the process. These careful business owners see the challenges and risks of rapid growth. They feel like these challenges are insurmountable.
Let’s be clear: there are risks, and rapid growth can end in failure. That doesn’t mean that failure is a guarantee.
Your firm can grow too quickly to keep up with changing technology, increased customer demands, and deeper budget needs. However, most of these problems can be solved with strategy, foresight, and partnering with the right specialists to help you through the process.
The best preparation for rapid growth is to plan for it.
Steering away from fast growth just because there are dangers associated with it means missing out on a significant opportunity to make your mark.
We most commonly associate rapid growth with technology — the largest emerging industry in the United States (and most of the world) today. It’s tempting to assume that if you don’t operate in a high-tech sector, you won’t be able to take advantage of rapid growth.
Yes, many tech firms will experience rapid growth. However, the reality is that they’re not the only ones. Among the ten fastest-growing industries in the United States, you’ll find surprises like beverage manufacturing and civil engineering construction. In fact, seven of the 10 industries in last year’s list were tied in some way to construction industries.
More importantly, though, rapid growth is relative. By definition, it describes firms that ‘grow much faster than the industry average.’ That means your company can experience this phenomenon even in a declining industry. Every industry can accommodate growth firms, as long as they know how to build and scale their operations.
Rapid growth involves scaling up, rapidly. Office space large enough for 10 employees will become unsuitable for 50. A CRM solution built to easily handle 500 customers can become cumbersome for 5,000.
It’s easy to think that this strategy is not actually attractive. The costs involved in scaling up quickly and the time investment to find the right solutions, can start to add up and quickly take a mental and financial toll that overwhelms unprepared business owners.
The fact that growth isn’t linear is true in more than one sense. The most successful growth companies build their business model around offering a product or service that can be expanded. They build an offering that grows without committing significantly more resources to it.
Business processes will need to be made more efficient, and systems need to accommodate a larger scale. When that happens, costs will not become unmanageable.
At its core, fast growth is a cost-benefit equation. Rising costs will be manageable as long as your revenues rise at a higher level. Add that equation to the ability to scale strategically, and cost should be a factor, but not an inhibitor, in moving up the S-curve.
Fast growth means more revenue. More revenue means more cash flow. It’s the simplest — and perhaps most optimistic — equation that a business owner can make. It also happens to be the reason why so many business owners strive towards this stage of the company’s life cycle.
Your cash flows very well might be improved as a result of your fast growth, especially if you are scaling efficiently. That doesn’t make it a foregone conclusion. At its core, cash flows are a budgetary, not a revenue consideration. Increased revenue doesn’t matter if your costs rise at an equal or higher level.
The natural conclusion is that you still have to budget wisely for sustainable growth.
That means planning ahead, anticipating future costs, and making sure they’re offset by revenue. A few months of rapid growth may not last forever, so don’t immediately scale up costs at the first sight of increased revenue.
Perhaps one of the most prevailing myths of rapid growth is that at some point, it just happens. If you just offer a great product or service and get the word out about it, it will eventually take off. You’ll begin to reap the rewards of your hard work, so all you have to do is wait for them to come in.
Case studies of past growth firms show just how optimistic this myth really is. If a good product and hard-working entrepreneur are all it takes for success, more than half of all new businesses would succeed within the first five years. Growth is not something that just happens – instead, you have to plan for it.
Growth planning is a strategic process that involves anticipating future growth, getting your staff invested in the forthcoming change, and budgeting ahead. It also necessitates an understanding of how to jumpstart the growth, and how to anticipate when it will level off. The more strategic you are in working towards it, the better.
When the company thrives, everyone is happy. It pays to work at a successful business, with job security in hand and a vision for the future. That’s why it’s only natural to assume that once your company takes off, everyone will be on board.
During this business phase, managing your employees is just as important as managing your processes and capabilities. As mentioned above, rapid growth will require an adjustment in ‘how things are done around here.’ Your team needs to be completely on board with that shift.
That can be difficult to accomplish at first, given our natural resistance to change. Involve them in the decision-making process, and give them the ability to step back and see the bigger picture. Most importantly, provide them with the resources they need to accommodate the change and growth.
Does hiring really change during rapid growth? It’s tempting to assume that it doesn’t. After all, you’re still going through the same process, reviewing resumes, and selecting the right candidates. It’s tempting to think that simply accelerating that process will be enough.
In reality, the opposite is the case. If you plan to hire 50 employees and get about 50 applications for each position, that means going through 2,500 resumes just to select the right candidates. You’ll also run into potential issues with current members of the team who feel passed over as you hire in new staff members.
In that busy work, it’s easy to lose sight of what matters and simply hire with an eye towards speed. The better approach is to systematize your hiring process so that you still keep culture fit and other intangible aspects in mind. Only a comprehensive hiring strategy can help you make sure that as your company grows, hiring does not take a backseat.
We can help you with that last part. Contact us for help to hire the right employees, at the right time, for your specific business situation.