The 6 Biggest Challenges You’ll Face Growing a Company (It’s Harder Than You Think)
Explosive growth sounds great, but it has tons of challenges. Your focus needs to shift when your company moves to this stage.
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It is during the rapid growth phase of a company where a product turns into a real business. Many companies do not survive this transition for a variety of reasons. Six key challenges exist as you transition from an early stage single product-market segment to a rapid growth multi-product, multi-market company.
1. Expanding your sales team, implementing a sales process, and measuring results
Rapid growth involves adding complementary products and expanding into new vertical markets. You need additional sales people and may even need new sales channels to reach your varying target customers. As you add new products and customers, you will likely need to refine your sales funnel process to account for different sales cycles. If you don't do this, forecasting becomes a nightmare, and company boards and investors only like to have sweet dreams.
In today's world there is no excuse for not having a solid Customer Relations Management (CRM) system, and a process behind it.
Measuring cost of sales and other key metrics including the sales cycle, customer acquisition cost, lifetime value of a customer, churn, conversion rate, and customer satisfaction is essential. Look at competitive metrics to help determine what an adequate level of performance would be and what it takes to be "world class" in any category.
2. Building a proper operations or manufacturing function
As you increase your product volume or number of users, you must have a product that can scale with accelerated customer demand. When you are developing a product, it is important to understand what volume you will need to support assuming you are successful. Shipping a handful of widgets, or supporting a few hundred users is vastly different than supporting hundreds of thousands or millions of customers.
Lack of scalability in your product or service offering can also create perverse side effects like upset customers or massive technical and customer support issues. As the Robert Redford character Nathan Muir said to his assistant in the movie Spy Game, "When did Noah build the arc Gladys? Before the rain." If you try to fix a product that will not scale during a period of rapid ramp, it may very well kill your company.
If you have a physical product, you will need to determine how much inventory you need to service demand. Measuring inventory turns and production cycle times is critical. I've seen companies that do this poorly and wind-up with massive amounts of inventory that they cannot sell. This can wipe-out all the profitability from earlier sales, or, worst case, tank your company.
Understanding the working capital requirements as you have higher accounts payable and receivables is also essential.
3. Hiring the right people at the right time
In hiring during rapid growth, the temptation is to hire as quickly as possible. But hiring too many people too fast can be a deadly as hiring too slow. Continue to focus on quality and cultural fit while filling the most critical positions. You need to look at your team company wide and identify key bottleneck areas.
Think about your company as a total system. Hold managers accountable for spending the necessary time on the strategic area of hiring.
4. Implementing a product development process and customer support team
Developing a 'buffer' between your sales team and the direct customer is critical in this stage of a company. A skilled product marketing team can discern and filter which product features to include in new products. If you don't have this filter, you will end up doing whatever the loudest and most forceful voice says, or even worse, try to do everything that every customer tells you they want and need.
5. Moving the focus of management and leadership from the core to the periphery
While product development is at the core of an early stage company, sales and operations becomes more critical during rapid growth. There still needs to be a balance between innovation and execution during rapid growth, and great leaders will guide the decisions between sales, marketing, operations, finance and product development to ensure that you meet customer demand while expanding the team and having a product roadmap that isn't impossible to execute against.
The temptation is to concentrate solely on tactical issues. As a leader, you need to continue to highlight and drive key strategic issues like hiring and the product roadmap in the midst of the chaos of an explosive ramp.
6. Implementing critical processes
While innovation is the cornerstone of early stage success, repeatability and incremental improvement are essential during rapid growth. This is not to say that you shouldn't have a solid product roadmap. Quite to the contrary, you just need to have extensive re-use of earlier products in your new platforms. This requires more extensive documentation and process implementation than is wanted or needed in an early stage company.