While businesses that make it past early stage have a greater chance of surviving long term with every passing year, growing a company doesn’t become any easier as it ages.
There will always be make-or-break decisions on the table, volatile environments to navigate and standard challenges to overcome (like making sure your company’s eggs aren’t all in one basket).
This means an important key to growth is simply not taking risks you don’t have to take.
Here are five ways business owners commonly risk too much when growing their companies to the next level:
You’re risking too much if you:
#1: Allow the emergency to take your focus off the imperative. It’s very easy to let the crisis of the day take your attention away from what’s most important to your company’s growth. And, of course, there’s an even bigger issue if you’re not certain what is actually most important. First, identify the one to three imperative activities or projects that will grow your company the fastest and smartest way possible. For most mature companies these imperatives typically relate to: a) decreasing costs; b) reducing time to market; c) improving customer service; and d) furthering your company’s edge over competitors. Once your company’s and, therefore, your personal priorities are determined, dedicate the bulk of your time to focus on those. If you find yourself being pulled into the day’s fire, take a step back and ask yourself why you’re not delegating. It could be a skill you need to develop or it could be that you’re also taking the next risk on this list.
#2: Hire the right people too fast and fire the wrong people too slow. You’ve likely heard the advice “hire slow, fire fast” before and it’s especially critical when it’s time to make another significant growth move. Growth periods are the ideal time to survey your team and make sure you have the right people on the bus and that each person is in the right seat. While it can be difficult to wait for the ideal candidate for important positions or to let go of someone who’s been loyal to your company, to do anything else is to put your company in danger. To facilitate the right hire, utilize your network and get the support of professionals who can save your company time and money in the long run.
#3: Underestimate cash requirements for growth. Lack of cash flow is the leading cause of death among growing companies. Simply forgetting a few items necessary to fund growth, combined with the unforeseen, makes cash disappear fast. To avoid this, build a cushion into your funding estimates, but don’t view it as a cushion. Rather, know that this additional cash will be used to achieve the next level even if you don’t know exactly how it will be used when you estimate for it. To view it as a cushion is to risk using it elsewhere as soon as growth “seems” to be going smoothly.
#4: Think more of the same will get you where you need to go. Growth can be achieved by selling more of the same products and/or services to the same customers in the same geographic area. But that type of growth cannot be sustained – eventually your company will hit a wall. So while setting deeper market penetration as a goal is not inherently a mistake, companies seeking serious growth need to look for new customer segments and innovate new products and services to sell to existing and new customers.
#5: Make “luck” your business plan. Growth can occur from simply being in the right place at the right time. However, growth based on luck never lasts long. To continue to grow, a company needs to prepare for market change and be ready to pivot if necessary. At the same time, make sure to take advantage of any good luck your company does experience by using its profits to build the infrastructure you’ll need down the road and to create a foundation strong enough to navigate the unexpected challenges that are certain to come your way.
It’s a misnomer that entrepreneurs and business owners are risk takers. The smartest and most successful ones are, in reality, risk minimizers. These individuals understand that many risks that kill a company’s growth and even cause it to fail are highly avoidable and they keep tabs on their own mindset and actions to ensure they’re not slipping into risky territory.
What do you think is the #1 most common and/or dangerous growth risk mistake business owners make? Add your comment to the conversation on LinkedIn.