April 11, 2018      3 min read

Shifting gears from a fledgling startup to a medium sized enterprise is an exciting challenge, but not one without its pitfalls. Growing pains are real – as a business scales up, any number of things can go wrong. Each business’ risks and opportunities are different, although there are a number of common pressures that stand in the way of growth. Here are five of the biggest challenges along with some tips to overcome them.

Customer Reliance

Many businesses are reliant on several key clients, particularly businesses in the manufacturing, wholesale and distribution sectors. Dealing with several key clients can be a boon – it requires significantly less administration and relationship management. On the other hand, reliance on a handful of clients can put you in a difficult position as you grow. If a key client suffers financial difficulties or switches provider, your business’ cash flow and platform for growth is liable to suffer. Moreover, lenders are likely to treat a business with few clients as a riskier lending proposition than a business with a diverse, extensive customer base.

If your business is dependent on several key clients (or even several key market demographics), it’s important that you don’t lose sight of this. Your existing customers are responsible for your growth to date and are usually the easiest source of revenue going forward. Without your existing customers, your business is likely toast.

Overcoming customer reliance can be as simple as building customer acquisition into your growth plans. Tools like customer specific pricing can help you attract new business without sacrificing existing business on favourable terms. Invest in customer relationship management, which can help retain business amidst stiff competition, as well as to identify customers who are late to pay.

Overconfidence

You’re focussed on growth and confident that you can succeed; this confidence has probably led to your business’ success to date, but it can also be the source of peril as your business continues to grow. Even an experienced business person can fall victim to overconfidence bias, where an entrepreneur overestimates factors such as consumer demand, staff productivity or production cost. Consult with a business coach, your accountant and lawyer or other business owners to make sure that your plans are realistic. Growing a business demands some level of risk taking, but it’s crucial to make sure those risks are calculated risks.

Staff Fatigue

As a business grows, existing staff often must bear an increasingly challenging workload. Growing sustainably means ensuring that most of your staff continue to be enthusiastic about your business and its future success. If your growth plans lead to staff being unhappy at work or burning out, you’re likely to lose capacity and institutional knowledge right when you need it most.

As you grow, consider hiring more staff to handle additional work. At the same time, your growth has likely created scope to delegate more management tasks to your staff. This means you can spend more time operating at a strategic level, but also emphasises that your company is a place where staff can progress.

Supply Chain Fragility

Increasing specialisation means that supply chains have become more complex than ever before. This creates a risk for growing businesses – whereas larger businesses can vertically integrate or invest in supply chain control, smaller firms often have to accept the risk of a supply chain failing at a critical time. Unexpected stock outs can put an immediate end to a business’ growth plans, so any business that is planning to scale up should think carefully about managing supply chain risk.

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