Watching your small business grow can be one of the most exciting feelings in the world. Seeing that little project you launched in your bedroom blossom into something that brings joy around the world, has a positive impact on society and gives talented people a place to show their skills is what every entrepreneur strives for.
However, growth is not always a net positive. While business growth is typically a symptom of success, there are numerous instances throughout history of businesses growing beyond their means.
For these businesses, growing prematurely was much worse than staying in their comfortable space in the market. Sometimes, slowing down and taking stock before attempting to advance is the best action.
In this article, we’ll outline some of the common ways businesses have fallen into this trap and grown beyond their means to help highlight potential failures you may be walking into and give you the knowledge to define your business strategy for 2021.
Choosing The Wrong Website
There is perhaps no asset more important to a small business than its website.
That’s why building the wrong website or upgrading at the wrong time is such a detrimental decision for small businesses.
Many businesses launch with a simple version of their digital home. Perhaps they’ll use a template store builder or opt for cut-price hosting. Once demand increases, they’ll try to upgrade to something that’s lovely and shiny on the outside but is a difficult machine to master on the inside. The bottom line, a professionally well-designed website is crucial to any business growth.
This kind of business growth can make it difficult for your team to do their day-to-day tasks and if you’re lacking in the right content, it can make your new site look barren and cheap.
Equally, sticking with an outdated platform but trying to upscale your business is a recipe for disaster. In eCommerce, free platforms such as osCommerce (check out this review if you’re not familiar) will do the job in the early days. Still, you’ll often need a leading provider, such as Shopify, Wix, or even a bespoke store, to really upscale your business and have the website presentation to match.
Mismanaging Social Media
In case you’ve been living under a rock for the last fifteen years, social media is one of the most powerful tools available to small businesses today.
However, many business owners still take for granted how difficult to can be to cultivate a strong online audience and engage with them over Facebook, Twitter and Instagram in ways the platform demand.
There are countless tales of brands and small enterprises who ‘got social wrong‘ and proceeded to harm their reputation through poor customer interactions, broken promises and bad timing.
Social media is something your business should be taking seriously as it attempts to grow, but using it as the main avenue to expand your operation comes with unique risks.
Trying to inflate your reach artificially and make your pages look more impressive to prospective partners by buying likes or followers is a seriously bad idea. It will put some big red flags against your brand going forward.
Likewise, attempting to raise awareness in your brand by investing too heavily in paid ads or popping up in every customer conversation with a quirky comment is a quick way to drain your cash and get marked as one of those annoying brands everyone blocks.
Social is great, and you should be making it a strong part of your operation. But every day, you have to make lots of little decisions about how your brand presents itself. Too many bad ones can be significant.
Poor Hiring Decisions
While individual hires may not have the same impact on your business as they did in the very early days, picking the wrong people and spreading your workforce too thin can significantly impact an enterprise’s ability to take the next step.
Poor hiring decisions aren’t just a case of picking the wrong person for the job. It’s just as important you aren’t creating roles you don’t require.
Small businesses have the advantage of a hyper-connected team (often working in the same room) who can execute simple, effective ideas. At this point, everyone is aware of their colleagues’ strengths and weaknesses and can complement them to create a well-oiled machine.
Forcing your business to expand and move away from this method can see you throw away one of your most valuable traits and greatest advantages.
Yes, sometimes you need to hire a specific person to take your business up a level, perhaps someone to handle finance in-house or a dedicated creative to spruce up your branding. However, these decisions should be based on realistic projects rather than a desire to mold your business to match the Silicon Valley enterprise you’re obsessed with.
Take advantage of the many freelancer networks out there and bring in temporary staff instead.
Trying to Define a Culture Before There is One
Cultivating a strong company culture is an increasingly important requirement for small business owners, with top talent across the world choosing their next role based on how fun and friendly a place looks to work.
Great company culture is also a brilliant marketing tool, helping you to win clients who want to be associated with a forward-thinking enterprise and earn plaudits for your modern approach to staff treatment.
However, trying to present yourself as a business with a bustling community culture before you actually have one is a great way to harm your reputation and grow beyond your means.
Company cultures need to be organic (as these examples show) and defined naturally by the people who work there.
Each small business is unique, and those great cultures you hear about on LinkedIn didn’t spring up overnight. Faking your way into a fun, modern workplace won’t make you grow faster. It will just earn you a bunch of bad reviews on job sites.
Businesses That Grew Too Soon
To close out this article, let’s take a look at some businesses that paid the price for growing beyond their means. Hopefully, these case studies will help you identify potential pain points in your business and avoid you walking into a similar catastrophe.
Ever block someone on Facebook for incessantly sending you Farmville invites? You can blame Zynga for that one?
The California gaming company launched in 2007 and almost immediately made their mark on the industry with a farming sim so popular it introduced an entirely new player base to the concept of online gaming and gave your parents a reason to log into social media every day.
Suddenly Zynga was Facebook’s most successful app developer with a string of popular titles.
By 2013, however, they had been forced to shut down many of their most popular games and lay off 500 employees, with 300 more leaving the company in the next year.
Zynga’s mistake was tying its success too heavily to Facebook. This made the reach and growth potential of their games totally dependent on a platform they had absolutely no control over and was never going to be able to keep up with.
A simple update to Facebook’s notification policy suddenly made Zynga’s entire marketing strategy spam on the very website they’d built their name, severely limiting their ability to draw in new players.
2021 marked the end of Farmville, serving as a stark warning to companies that just because a partner has the rocketship strapped to them doesn’t mean you do.
In 2012, ICT consultancy and management specialists XciteLogic were on top of the world.
They’d just won the Rising Star Award and would go on to spend the year growing by 600%, seeing a significant staff increase in that time.
However, in 2013 the company was in bankruptcy, owing unsecured creditors, including Apple and HP, nearly $4 million.
How did this happen? The company decided to think big, working on developing a standalone education-based software business. With the company trying to grow beyond its means at the same time, this made it impossible for them to accrue the capital needed to sustain its workforce.
XciteLogic may have felt invincible, but they were actually incredibly vulnerable.
The tragedy of XciteLogic is a similar tale of Zynga, one of over-confidence and over-reliance on a much larger partner company. Had they consolidated their assets and taken stock of their situation, the company could still be in operation today.
While business growth is important, it’s necessary that your decisions are grounded in reality.
The idea that if you aren’t moving forward, you’re moving backward simply isn’t true for every enterprise. That’s the kind of thinking that breeds pointless managerial decisions and harms company culture.
However, it’s still important to have a long-term plan and goals to aspire towards. The to is to ensure you’re making sensible choices at every growth stage. You will need to take risks on occasion, but the future of your business should never be on the table.