What are the challenges of business growth?

Business growth problems and challenges are faced by every growing business – because they’re doing something new. Even if you are still doing the same thing, there will be new problems due to the bigger scale. There are new challenges for both the business and the business owner.

The skills of the business owner need to expand. They need to support the extra activities that the business is doing and the additional scale at which it is doing them. Some of the challenges are short-term, whilst others may have long term implications.

Better quality problems

A growing business faces better quality problems because they are about how to deal with success, rather than how to deal with or avoid failure!

As these are new to the business owner, fore-warned is fore-armed, so let’s look at a few common challenges and how you could deal with them.

Sales and Marketing

Business growth problems in the sales and marketing area can be significant as the relationship with your customers changes as you scale up. For a small business growing it may mean a loss of the personal touch and a more impersonal relationship.

Ineffective marketing techniques

Marketing has shifted significantly over the last few years and the trend to online media will continue at pace. Using outdated marketing techniques coupled with a poor understanding of the psychology of your buyers will mean that you have ineffective and expensive marketing.

A scalable approach to marketing will almost certainly require some more advanced digital marketing techniques. These are increasingly sophisticated. Every business owner really needs to grasp the core concepts. Then they can take a strategic approach to digital marketing.

If your business is going to succeed at digital marketing you will need to ensure that you have the ACE digital marketing skillset in place – either in-house or outsourced.

When done properly, digital marketing is really a system that produces consistent, profitable customers from online channels.

I’ve written an introductory digital marketing ebook just for business owners like you so that you can understand how to make digital marketing profitable for your business, the core compenents that you need – and to appreciate just how revolutionary it all is.

Overstretched sales processes

During a time of growth, sales can be much less predictable new approaches are adopted.  Inconsistent sales can be difficult to manage. A feast and famine roller coaster can lead to significant pressures on the business.

So what’s good at being consistent?

One answer is to use systems, IT and automation. If you can systematise and automate your sales and marketing process, then it’s much less dependent upon the available time of individuals. It can then be much more predictable, consistent and scalable.

Look at investing in a solid CRM system – and most importantly learn how to use it properly to get the most out of it.

Competitors respond

As you grow your business, your competitors will notice and respond. One recurring problem during a phase of growth is that you are so busy that you “take your eye off the ball”. In marketing terms this can mean that you’re too busy delivering for your customers to notice what your competitors are doing. As a result, the first you may know about it is when your sales take a knock.

If your marketing has good solid foundations then you won’t need to compete directly. Stick to your key differentiators and ensure your customers understand and value them. You should then have less need to compete on price but instead you stick to your distinctive offer. Double-down on those messages to differentiate yourself from your competition.

Actively listening to your customers and their feedback is key here. If you can collect it independently, so much the better as you will get their unvarnished viewpoint, letting you know what’s really going on before it’s too late.

Increased complaints

The increased volume of sales will inevitably increase the volume of complaints, even if it just rises on a pro-rata basis.

However, there is a risk that complaints increase as quality drops and the service level changes or it drops in customers’ perception. Long-standing customers may notice a change in quality, whilst new customers may not.

Understanding whether your complaints are coming from old or new customers will enable you to respond appropriately. You may need to make a choice between losing some older customers in order to gain new ones.

People and Management

Business growth can impact on people in many different ways and this can cause a variety of problems for your staff.

For “growth”, read “change” – your growth programme may need careful handling as it is really a process of change management. Some people will be on board and enthusiastic, others will be concerned or reluctant to change because “this is the way we’ve always done it”.

Low staff morale

There will inevitably extra work for some people and morale may drop if staff cannot cope with the extra work.

As a result, productivity can decrease and staff can burn out. If there are specialist areas where it is difficult to recruit new people, then this is likely to be a pinch point.

High staff turnover

If you’re not careful, the first you may hear about any problem is when staff leave as workload gets too great. The willing and able staff may take on more and more until one day they vote with their feet!

Make sure you check in with people – particularly the willing and able ones. Don’t take them for granted as it may set you back significantly if they leave without warning.

Hidden recruitment costs

One of the risks of people leaving is knowledge lost, particularly if it’s not documented. It can be difficult – if not impossible – to recruit new staff that have the right skills, knowledge, experience AND the right attitude. This can be a slow and expensive process with potentially a high failure rate!

New staff require an induction, mentoring and training. This takes time that you can ill afford during a time of growth. So look after and appreciate your key staff and mitigate the risk of them leaving.

Staff burnout

Check also for signs of burnout – stress and illness can increase at these pressurised times of growth.

Everyone can do an extra hour’s work. Until one day they can’t do any work because they’re ill or burnt out.

Check whether everyone is taking their leave entitlement, look out for signs of stress and pressure. It may be better to slow down growth and keep people in place than to go too fast only to see it falter as people leave or burn out.

Consider what might happen otherwise. Those that stay pick up the workload – either willingly or unwillingly – of those that leave or are ill. Willing people do the extra work without complaining as they don’t want to add to your burden. Those that are healthy take on the work of those that are sick. People get over-stretched, they can’t do the work quite as well and productivity can collapse quite rapidly. Listen for what is not being said, don’t let them suffer in silence, identify where extra resource is needed and when to re-prioritise tasks.

Diluted culture

Culture changes as a business grows. What was once small and intimate is now large and potentially disconnected.

Long-standing staff may not like the change, and handled poorly they see the culture get diluted with new people. In addition, the introduction of new processes required for larger teams might make some of them realise that they like working for smaller organisations or start-ups more than they like working for you!

A burst of growth represents a new chapter which may prompt people to take stock and wonder whether now is a good time to move on.

High risk linchpins

Have you got any linchpins? A linchpin is someone who is so critical to the business or an area of it, that without whom it all – or part of it – collapses. All the key knowledge is in their head and everyone relies on them. Assess your vulnerability and plan accordingly.

Try to avoid having linchpins who hold your business success in their hands. Get others to learn what they do, make a plan in case they leave, get them to document what they do – minimise your exposure to linchpins.

Overwhelmed managers

One of the more significant business growth problems is that managers – including business owners – become overwhelmed. They may be firefighting and reacting to crises and problems caused by growth during a time when they should be driving it forward.

They become focused on the urgent not the important.

Major issues can go unresolved until it’s too late.

The pressure exposes what you thought were strengths as weaknesses.

Make sure that when focusing on your staff, you don’t take your managers for granted – including yourself!

Delegation failures

The increased need for delegation as a business grows requires new working practices to be adopted and new skills to be learnt – particularly soft skills and delegation skills. Just when great management and delegation skills are being developed, they are needed most! There is a high chance of getting delegation wrong and learning the hard way.

Working under the pressure of growth targets, people may hide their performance if things aren’t going well. They may not share bad news until absolutely necessary, by which time it is too late. In this situation the business needs good clear communication and delegation skills.

There is a paradox here. It is difficult to give true oversight if you don’t have time, and yet it is because you don’t have time that you delegated in the first place!

Team feels undermined

When growing a business there are so many moving parts that there can be an understandable desire to make sure all the elements work and get involved in the detail of what everyone is doing.

Don’t micromanage! You haven’t got the time and people don’t like it. It undermines the relationships with the team. It can stifle creativity. People then won’t do anything without checking with you first, because that’s the behaviour you’ve taught them.

The team are there to save you time, not to be an extra time burden.

But if you don’t manage the detail, you might lose control of critical activities, which is another risk of a growing business.

Losing control

When managing others, it is necessary to strike a balance between control and oversight on the one hand, with trust and autonomy on the other. You can’t and don’t need to micro-manage. However a laissez-faire attitude won’t work either as you’ll lose too much control at a critical time.

One approach is to make the framework for delegation clear at the outset. Make sure you clarify specifically what is expected, i.e. what needs doing and any essential elements of how it is done. Make sure that you are clear in your own mind and communicate where there is freedom and where there isn’t. In management guru terms, establish clear “tight-loose properties”. Some things you need to control tightly. Other things you can hold loosely and leave the team to do as they judge best.

Think carefully about the information you need to maintain control. Set people targets and indicators. Include some process and activity indicators will that pick up what isn’t happening early in the process, giving you time to react if things aren’t going well.


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Profit and Cash

Business growth problems can of course be financial as well. Business growth does not always equate to greater profit and cashflow can be even tighter when a business is growing.

Upfront cash requirements

In theory business growth is good because economies of scale spreads fixed costs across more units of output, reducing the cost per unit sold and so increasing profits. In practice, business growth can be an expensive business!

There can be a time lag between growth and economies of scale.

The overheads will need to be ramped up before the fruits of growth appear. So profits are likely to go down in the short term and cashflow is likely to be tight unless it is properly financed in advance.

False economies

Tempting though it is not to recruit staff before they are required, this could turn out to be a false economy.

Be careful that you don’t just create a spike in overtime. This eats into profits anyway as well as eroding morale.

Be clear when you need to recruit and factor in the lead time for finding the right people. If you leave it to the last moment you are at the mercy of the market right then. You also don’t have the time to find people who are a good fit.

Is it better to recruit the right people too early or recruit the wrong people too late?

Financially vulnerable

Larger businesses look more robust as they have greater income. This may not be true as they have a larger fixed overhead base. They may not be very resilient to a short-term decline in income due to a large fixed cost base.

Be careful as your grow to make sure that you have some flexibility built into your plans. The point of growth is usually to make the business more robust, not financially vulnerable!

Increased debt

Running out of cash is a very typical reason for businesses to fail – over-expanding or over-trading can lead to this – even if the business is profitable. So you may need to make preparations to borrow. Or put a borrowing facility in place in case. Or closely manage cash in order to fund expansion costs. You may need cash for long-term investments like new premises or equipment. Or to fund short-term expansion costs like more staff.

Investment spend comes before the return. If you do it too quickly there’s not enough cash to last. Expand your solid sales and marketing channels to generate the cash if needed to fund the riskier expansion plans. If in doubt, slow down!

Unbudgeted financing costs

The extra costs of borrowing may eat into profits. Unexpected borrowing may mean you cannot get cash on good terms. If your loan has punitive terms then higher costs may hit your bottom line later.  If growth stalls you may not have the cash to pay back the loan as quickly as hoped.

Systems and Operations

In a small business, one-off problems are quickly dealt with. In a larger business, problems multiply and can be categorised with what they have in common.

So, identify problems and develop effective systems to deal with them. Either design systems to deal with them in future or to prevent them in the future.

Out of control

Systems are great, but if they are not controlled and are not under your control, then they are dangerous – they are literally “out of control”.

Systems should be sets of processes and procedures designed to produce an end result with a certain level of quality. You need controls in place to make sure that all happens as planned. Trusting people isn’t a strategy as it can have expensive consequences! Instead rely on systems and controls.

Put in place systems and controls to prevent things going wrong and some additional controls to detect when they do. Put controls in place as early as possible in the system to ensure that you have the breathing space you need to take corrective action.

Compromising quality

Extra pressure on time means that quality can drop as people get busy – and “getting it out the door” becomes more important than getting it right. Initially no-one notices standards slipping. People give reasons and make excuses. You may find that complaints go up or customers vote with their feet.

Be clear about which elements are critical and valued by the customer and which ones could be reduced.

Stock wastage

When growing there can be a temptation to buy in bulk to secure cheaper unit costs. There is an assumption that you will sell them all as you are intending to grow. However, you need to test this assumption. If your growth plans don’t succeed or take longer than expected, then obsolete stock will saddle you unwanted costs.

It may be better to accept a reduced gross margin and buy smaller quantities until your growth plans look like they are working before expanding quantities.

Compliance failures

As your business grow you may trigger new red tape requirements which you inadvertently fail to comply with, leading to fines and unexpected costs. For a small business these can be new requirements for staff, pensions and VAT for example.

Find out in advance which thresholds you might trip over in the coming year and be ready to deal with them at the right time.

Inefficient premises

If you operate from premises then you are likely to outgrow them as you expand your business. There brings with it extra fixed costs and the disruption of the moving process. The temptation is to put off getting larger premises. As a result, you can put too many people into a small space that makes it over-crowded and inefficient.

An alternative solution is to add satellite premises separate from the main location, the risk here is that communication breaks down and separate cultures emerge. Selecting and moving premises is also not straightforward as there are many moving parts.

Planning ahead will of course help. Determining the right time to move and who to move when are also factors.

You can turn new premises to your advantage. Simply making statements to the staff team that the business is growing. If you do this well, the team can feel a sense of ownership of “our new premises”.

It can also be an opportunity to change working practices. You can physically configure people in different ways to better suit the desired ways of working. Maybe some noisier teams need to be located away from those that need quieter space, or working relationships and communication between teams can be improved by locating them together.

You - the business owner

Business growth problems are not just about everyone else, you, the business owner, are almost certainly one of the strongest and weakest links!

During a time of business expansion, fatigue can set it, meaning that you are surviving rather than thriving. You may even hate your new role. It can be a constant mode of crisis management with no end in sight and no rewards yet. You may feel it was simpler at a smaller scale!

Instead of you running your business, it’s running you.

However, if a strong sense of inner purpose drives you, then this can carry you through. Even so there may be times when the pressure is constant and relentless. You will need to consider how to justify it to yourself, your family and your friends. Be ready to put some boundaries around your work, even during a busy time of growth.

It also pays to be aware of what happens when you are feeling overstretched. Do you wake up with 2am panics? If so, what’s going to give? What’s going to change? It can’t carry on like that for long, so take time out to think how you will turn it around.

Overloaded headspace

Is your headspace overloaded? If it was spaghetti in your head, what would it look like? A cooked mass of entangled strands? Or more like raw spaghetti, clearly separated, straight and orderly? To be effective during growth you need to untangle the issues and focus on one at a time. Many will be new issues requiring more time and thought than normal.

Get stuff out of your head and have a way of prioritising it. This will enable you to focus just on the key things at any one time.

If you are feeling overwhelmed, then there are a number of simple actions that you can take to regain control and beat overwhelm.

Ill-informed decisions

If you can’t see the wood for the trees, then you have an incomplete picture and you are unable to make well-balanced decisions. We often make bad decisions in haste.

Get thoughts and feedback from others – your colleagues or your team. This makes sure you’ve got all the information you need. If that’s not possible then work with someone like a business coach to help you get a more rounded picture and make better decisions.

Throwing good money after bad

Learn when to pivot and when to persevere. Know when to conclude it’s failed and to do something different. When growing your business, you need to accept that things may not work as expected. You need to be ready to stop throwing good money after bad.

Test your assumptions in the real world. Persevere when you can see what to tweak. Think about changing direction if you’ve got enough evidence that you’re on the wrong track – and why. If you don’t know why it’s not working, then there are probably some insights you are missing – identify some of those and you will know whether to pivot or persevere.

Focusing on the wrong things

Are you focusing on the wrong things?

One of the challenges of business growth is to identify the vital few factors that will drive growth.

Then you need to ensure that you stay focused on those. You then deal with any other operational issues in a different way – i.e. by givnig them to someone else!

Dealing with tough problems

Business growth problems are often better-quality problems – but they are also often tougher problems.

As the business grow there are more problems to sort out. Your team will do most of them given half a chance. However you will find that you end up with the difficult ones. As your business grow you will increasingly just deal with difficult, new or unclear problems with no right answer.

As a purpose-driven business owner you will need to use your overall purpose, values and principles to decide what to do as there is no right answer, only what is right for you.

If you don’t have strong values, purpose and principles, your decision-making will fail as your business grows. You will quickly go off course, driven by pragmatic short-term quick fixes. It is better that you drive the business with strategically informed decisions that stack in the right direction.

You should try to deal with the difficult stuff that other people could not do. Resolve it once and set a policy. Then draft some procedures or put a system in place so that you never have to deal with it again! The quality and complexity of your problems goes up. All the easy ones get dealt with further down.

If you find yourself having to explain something again – you’ve not taught it right or you’ve got the wrong people.

Conclusion

Everywhere you look there are potential business growth problems! Having read through all these potential challenges, you may even be wondering why any business would want to grow!

There is a point to setting out all these common business growth problems. It is to help you think systematically through each area of your business. You can then identify the challenges that might arise for you and consider how best to prepare and gear up for growth.

Is your business growth-ready?

If you are keen to avoid these common business growth problems, then you may need to shape up your business to make it ready for growth.

If this article has prompted you to think about the areas that your business might need to improve, then you may like to do the Shape Up Your Business Self-Assessment. This takes you through the 6 key areas of a business. You will then be able to create an action plan. To shape up your business ready for the next stage of its development.

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Each of the six key areas has a video to summarise that area, bring the issues to life and help you formulate your action plan.

Pull out key actions from ideas and suggestions provided for each question.

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