Vincent Puma, River Capital on the Merits of Active Investment Strategies
How businesses can scale without stalling
With companies today growing bigger and faster than ever before, there is one trend that has become more common in the past decade: failure.
According to the U.S. Small Business Administration, there are 31.7 million small businesses in the United States, out of which 25.7 million have no staff members. With so many companies competing for market share, it's tough for new entrants to compete against larger, more established brands.
Scalability is challenging for even the most seasoned executives. Companies don't grow overnight. It takes time, money, manpower, and expertise to get off the ground.
Companies that take on more business than they can handle become unmanageable. Too many shops get ahead of themselves with grandiose ideas of global domination without first doing the necessary due diligence to ensure they’re set up to handle such a transition.
What Keeps Companies from Failing So Spectacularly?
Struggling to scale reflects an organization’s inability to adapt as they increase the size and scope of their operations. It's not enough to simply maintain the status quo; sustainable growth requires a thorough dissection of current operations to uncover opportunities for streamlining processes and continued innovation.
Several startups fail because CEOs of early-stage ventures are used to making business decisions in a vacuum. This is counter-productive for a business that wants to grow. Recognizing – and embracing – the need for additional management and operational support can prevent this misstep and future problems down the line.
Growing too big too fast is like playing with fire: you can easily burn yourself and lose everything. Investors like Vincent Puma, River Capital Group Holdings, advise that "even with the healthiest of balance sheets, decision-makers must be mindful of pushing money into costly advertising or marketing campaigns, for example, without allocating funds for future R&D, new hires, and other potential (and unexpected) expenditures.”
Also, overconfidence in one’s abilities causes many young executives to underestimate what it takes to succeed.
Entrepreneurs are typically visionaries but not managers of people.
Why? Because they're used to doing everything themselves.
To achieve your goals, it is best to surround yourself with a team of highly qualified individuals who fill the gaps in your team’s core competencies. Your business will grow exponentially faster if a good portion of the workload is delegated instead of being shouldered by just one or two people.
That said, sometimes it is necessary to delay growth by first perfecting internal processes before aggressively seeking new customers.
It’s increasingly difficult to find qualified talent in today’s market. However, despite the shortage of skilled personnel, new hires must be vetted to ensure their compatibility with your team’s culture. Rash hiring will not only result in wasted time and expenses but also disrupt performance and quality.
When growth becomes unmanageable, companies lose focus of their original goals or culture, making it hard to retain employees who are passionate about what you do. If your employees can't keep up, there is no time for learning and growing together as a unit.
Improving internal processes while maintaining a personal touch with customers is critical. You can't sacrifice the quality of service for growth.
The opposite situation is true as well: if a company doesn't grow fast enough, it can find itself struggling to remain relevant or keep up with competitors.
Not having the necessary funds to stay afloat if something goes wrong can put your company into debt that will be hard to recover from. Some companies opt for venture capital or make strategic acquisitions when they need to quickly add customers, employees, revenue, or new products to their lineup.
However, when outside investors enter the picture, you must ask yourself what is more important: capital or control?
When a lot of someone else’s money is put into a company, leaders become focused on acquiring new customers as quickly as possible – even if that means sacrificing control. Not only will investor expectations need to be managed, but employees must remain engaged in the development of your company.
Growing too big too fast is like playing with fire: you can easily burn yourself and lose everything. Investors like Vincent Puma, River Capital Group Holdings, advise that even with the healthiest of balance sheets, decision-makers must be mindful of pushing money into costly advertising or marketing campaigns, for example, without allocating funds for future R&D, new hires, and other potential (and unexpected) expenditures.”
Generally, when a company grows past 50 employees, management should augment staff for important tasks such as accounting and customer service. A small team with just one or two people cannot keep up with demand for their product or service while also managing back-office jobs.
Perhaps the most fundamental of all reasons for failure is when a company loses its way with regards to mission, vision, and values. Increasing success often leads to less face-to-face interactions between customers and members of the management team.
It's easy to lose track of what your end goal is and how your team fits into that picture when you get caught up in the glamour of spiking revenues. That’s why it is important to have trusted advisors who you can bounce ideas off, and who can offer a second opinion for major decisions – as well as keep you focused on long-term objectives.
Growth is great, but only when it’s sustainable and driven by real innovation - not just recycling products or services that don’t provide any new benefit. Staying true to what made your company successful in the first place while also catering towards an increasing customer base is easier said than done.
Because while adding more customers will bring in more money, there isn't any added value for existing ones unless something has changed internally. And as any business school student can tell you, it’s far more expensive to attract new customers than it is to keep existing ones happy.
If your company is on the cusp of breaking through the glass ceiling, it might be time to bring on a partner who’s been there and done that to get you across the finish line.
This Story Was Originally Published in Hackernoon