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You’ve heard the statistics: Approx two thirds of startups fail.
Young corporations fail for many reasons – from insufficient capital to lack of market demand – but the foremost wrongdoer is scaling too quickly. Growing too early at an unsustainable rate can be fatal and contribute to: estimated 74% from startup failures.
Ripped with the adrenaline of initial success, it can be tempting to pursue latest markets, diversified product lines, and a larger customer base in hopes of creating huge profits. However, without a solid foundation, scaling too quickly can cause a promising company to crash and burn.
You can scale your business sustainably by focusing on consistent, strategic and manageable growth.
This is my case of selecting depth over breadth in startup expansion.
The problem with growing too fast
Once you have secured funding for your startup, it’s possible you’ll wish to embark on an ambitious expansion plan. However, adopting a high-growth approach that prioritizes ROI at all costs carries risks:
1. Stretched-thin resources
Young start-ups operate with limited resources – including funds, labor and time. Expanding into multiple markets too quickly can result in future layoffs and hasty cost cuts.
2. Strained customer experience
When early-stage startups focus on scaling workforces and latest markets, basics like proper customer support can get missed. Overwhelmed by a fleeing customer base, teams may find it difficult to keep up the same level of user (or customer) service.
3. Quality compromise
Aggressive expansion can result in a decline in quality in all areas of the enterprise, including:
- Hiring. There are only so many qualified candidates in the job market at any given time. Bad hiring will cost corporations money in the future.
- Culture. Without proper supervision, uncontrolled growth can create a toxic work culture. Growing too quickly can burn out your team, contributing to low productivity, low morale, and high worker turnover – all symptoms of a toxic work environment.
- Product or service. As startups scale, sometimes what they do best gets diluted. Teams could also be unable to fulfill demand and maintain the quality of their core offerings.
4. Compatibility issues
Navigating regulations and compliance issues in one place can be difficult enough. Adding multiple cities, states and countries becomes even harder. As you expand to other jurisdictions, it’s possible you’ll encounter complications corresponding to unique employment, tax and payroll requirements.
(FYI: I learned this lesson the hard way when I used to be first starting my company. My limited knowledge of paid leave laws in various Latin American countries cost my company tens of hundreds of dollars).
5. Disturbed company culture
Maintaining company culture is easy if you are a small team with a vision. Expanding to larger teams across the country or the world makes it difficult to keep up core values. The larger your company becomes, the harder it can be to ascertain a universal culture and create a sense of community.
A damaged company culture is a serious matter: many studies confirm that it matters, including: one international study stating that 73% of employees wouldn’t apply to a company if it was not aligned with their values.
How to develop your startup in the right way
To ease the obstacles to building a greater and higher brand, consider these three rules for properly scaling your business:
Prioritize user experience
In a competitive market, user experience—that is, people’s relationship with your platform—separates lightning-fast startups from enduring brands.
To consider Slack, a hugely successful platform that built its user base, gathered feedback, and tweaked its product accordingly before evolving into a general collaboration tool. Or Zappos, the online shoe retailer that enjoyed meteoric organic growth by offering free returns and goes above and beyond for its clients.
My company, recruitment platformhas been successful in offering job seekers salaries that exceed industry standards, premium advantages and mentors. Our commitment to improving the job seeker experience has helped us recruit the best employees in the region and increased worker retention rates. Having the best talent has made it easier to draw the attention of top clients looking for expert technology employees.
Stay slim
History is filled with startups that succeeded by keeping costs low: Spanx was founded in the Nineteen Nineties with just $5,000 of the founder’s savings; The metro was launched in 1965 $1,000 borrowed from a friend of the founder’s family.
In the early stages of your business, limit your expenses to what you would like – unavailable capital – to permit enough room for growth. You won’t have the opportunity to scale if you stretch your capital, staff, or other resources too thinly.
Dominate one market before moving on to the next
Airbnb initially focused on improving its homesharing model key cities like New York before moving to other markets, building a solid foundation for subsequent global expansion. Streaming giant Netflix has invested heavily in creating original content and improving its advice algorithms moderately than expanding into unrelated markets.
Market visibility helps increase brand recognition, customer loyalty and market share. To achieve greater market presence, focus on becoming a dominant player in a specific area of interest or geographic area before pursuing latest opportunities.