The Dangers of Startups Growing Too Big, Too Fast

The Dangers of Startups Growing Too Big, Too Fast

By Egbulefu Chijioke Michael

In my short sojourn in the corporate world, I have noticed that some companies that started with a lot of promise end up doing very badly either by having very abysmal and insignificant growth rates (this is in comparison to competitors), remaining stagnant or even growing backwards altogether. Very briefly, I will discuss one of the reasons why this happens.

I have always heard that one of the best ways to run a successful business is to look for a problem and solve. When a company has a fantastic idea to solve a particular problem or two and sets out to do this, and they put the necessary hard work and structures in place to make lives or other businesses easier; Then the validation of their idea(s), structure and hard work is the number of customers and following they get along the way. Growing a huge customer and client base can be a double-edged sword for a young business. Comes with good and bad consequences.

Growth can be a cog in the wheel of success. It can be an obstacle in the way of running the business properly. There will be too much information and no idea what to do with it; too much unnecessary priority may be given to increasing the company’s top line to the detriment of other values; In the rush to meet demands, the wrong people get hired; Then there comes a time when the gap between company and customer gets too wide, this is especially dangerous for service businesses and most times, to maintain the growth of customer base and sales, these businesses tend to have more credit sales and the timeline for collecting these receivables gets longer and longer and suddenly they find out the books show they are making profits but no cash to back it up because most of the money is outside. This becomes a serious problem. May lead to bankruptcy.

The most important issue with growing too fast for me though is arrogance and customer service failures. When the business starts treating the customers like they are doing them a favor and starts treating them like they are replaceable and the customer service representatives becomes rude and full of themselves (intoxicated by their own phenomenal success), the only and biggest casualty here will be the company itself. Its sad that when most realize it, its almost too late and the harm is already done.

My advice? A company should take time to grow and a startup in the course of growth should not neglect to hire the best hands and never ever treat customers like they are replaceable, no matter how large the customer base might be.

 

Egbulefu Chijioke Michael is an Economist.

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