Article By: Michela Quilici – Business Growth Specialist for a Cue.
Premature Scaling – How can you avoid it?
As a CEO you’ll want to ensure you take the necessary steps to avoid the risks of premature scaling of your business. While many small businesses in a broad range of industries perform well and are continuously profitable, 20% of small businesses fail in the first year, 50% go belly up after five years.
According to the Small Business Administration, only 33% make it to 10 years or longer, and 95% of companies will never reach $1million in annual sales.
Startups can fail for many reasons: bad hires, overspending, lack of capital. A study from the Startup Genome Report found that 90% of startups fail primarily because of “self-destruction rather than competition.”
And what’s the biggest reason why? Premature Scaling.
To safeguard a new or established business, it is necessary to understand what can lead to business failure and how each obstacle can be managed or avoided altogether, regardless of what’s going on in the economy.
Building a business is a marathon, not a sprint. There are no shortcuts.
In this article, I share the five stages of business development that every company goes through and why taking shortcuts isn’t sustainable.
Every business goes through five essential stages of business development; in a particular order. Business owners experience a standard set of challenges and obstacles at each phase. They need to develop a specific skill set and mindset to keep up with expanding business needs or the pace of growth.
I’ve seen this framework play out repeatedly in my work with hundreds of business owners over the past 20+ years. Although every business owner’s journey is different, it doesn’t mean you have to forge a path on your own. Leverage the collective experience of hundreds of business owners to navigate growth in your business successfully.
Be purposeful and strategic about building and leading your business entity to have longevity and meet your revenue, lifestyle, and other goals.
Longevity comes from laying a solid foundation, putting the framework in place to support your vision, and using the right tools to grow strategically. You wouldn’t build a house without an idea of what you want it to look like, without architectural drawings to support reaching that goal, without the proper construction crew to make sure it’s structurally sound, or without using the appropriate tools to get the job done. Building a business is no different.
To avoid premature scaling, here are five stages of business development and two critical success factors that you have to master at each stage before progressing to the next.
Create VISIBILITY for yourself and your business, and educate the targeted markets so that they know you exist.
- Create Marketing exposure in the right places where your ideal target market hangs out and is looking for information to solve their problem or fill their need.
- Speaking your clients’ language, use their words, not yours. Crafting your messaging using the language of results and making it about them, not you.
Develop CREDIBILITY for yourself and your business, showcasing your expertise and competence in doing the work you are selling/offering to your markets.
- Spot on brand positioning that enables you to stand out from the competition and showcase your unique value proposition, so you become the most logical choice.
- Share your thought leadership and expertise on several authority platforms, whether by writing, speaking, podcasting, publishing, or earned media.
Reaching PROFITABILITY in your business, at which point your market is targeted, engaged, and closed on a business offering.
- Dial-in your market-qualified lead. This is your qualified buyer who is thinking about making a purchasing decision, has the motivation and sense of urgency, and above all – the authority, time, and budget.
- Create an effective and replicable sales process, a system for attracting and converting your qualified leads into clients and customers.
SUSTAINING that profitability in your business on a consistent and predictable basis, month-over-month, year-over-year.
- An effective marketing and sales strategy creates a predictable or automated marketing-to-sales funnel (customer journey) to get traffic, leads, sales, and referrals.
- Proven and documented systems and tools are in place so you can deliver with excellence every single time while retaining customers.
SCALING your business to leverage your supporting resources so that your business is not entirely dependent on you.
- Adjust your business model and sales and marketing activities to support your scalable strategy.
- Hire the right people for the right roles to carry out the functions in each business area to support the scalable strategy.
One mistake that I see business owners make (which cripples their business) is to expand before their business is ready—in other words, building a house on a foundation made of quicksand.
Premature scaling can take many forms; hiring too many employees too fast, not having an effective lead generation strategy to keep the pipeline full, spending too much on customer acquisition before the product is ready, or boosting marketing spending without analyzing core metrics.
I have seen business owners skip fundamental steps in an attempt to build a business quickly, and then they get stuck somewhere along the way. Check to see if you’ve mastered the initial three steps if you’re spinning in your business right now. Your visibility, credibility, and sustained profitability should be dialed in before you can scale with confidence.
Think of the first three steps as a rite of passage. Those initial steps are critical to helping you prove the business model.
And as a business owner, proving your business model is one of your primary goals. Do you have a market that wants what you offer and is willing to pay for it? Do you have a predictable system in place for generating leads and closing business?
Once you’ve proved those things, you have a solid foundation from which to scale your business efficiently and effectively. If you don’t prove the basic business model, in essence, you don’t have a workable business – so anything you do beyond that is like pouring water into a leaky bucket.
Prove the business model first – then work to prove that it’s a sustainable model – and then you can pivot the model and invest the money, expertise, and resources to scale it.
Which business development stage are you in? If you are spinning in your business and feel like it’s more challenging than it should be, you can use this framework I shared with you as a diagnostic tool.
If you’re stuck and want a way out, I’d love to show you the way. Apply for a Discovery Call today, and we will:
- Create a crystal clear vision for ultimate business success
- Get focused on the next most decisive step toward your goals
- Uncover the hidden challenges that could be sabotaging your sales and marketing efforts
- Leave the session renewed, re-energized, and inspired to grow your business faster and easier than ever before
- 5 Essential Steps for CEOs to Avoid the Risks of Premature Scaling - March 29, 2022
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