In 2013, LivingSocial had gained over 70 million members in just two years and employed over 4,500 people. Two years later, revenue had dropped over 89 percent. By 2016, the company once valued at $4.5 billion, was absorbed by its competitor, Groupon, for nothing.
Aggressive growth can be more detrimental to a company than advantageous. And for LivingSocial, it marked the end.
Advantages of aggressive growth
For a lot of business owners, an upsurge in growth signals success within their company. Growth has its advantages; it enables a company to reach more customers, generate more sales, and put money back in the business.
So it’s easy to overlook any disadvantages that can come with excessive growth, but more often than not, there are many challenges that companies face.
Challenges of aggressive growth
Here are a few challenges that if left unaddressed, could result in a company being consumed by excessive growth:
Not being able to meet the demand of new customers
On-demand streaming means never having to wait for a movie, Amazon’s Prime Now gives us same-day delivery, and ordering ahead ensures we don’t have to wait in line.
As customers, we’re becoming more and more like Roald Dahl’s Veruca Salt (I want it now!). Having grown accustomed to getting what we want, when we want it, we have a hard time when a company doesn’t meet our standards, or doesn’t deliver in a near instant.
Taking on too many new customers too fast can result in plummeting sales. For example, a company may not have the capacity or manpower to support things like fulfilling multiple orders simultaneously. Also, inventory can also increase and take up more warehouse space.
Technology can help support growth be providing solutions for you business. CRM tools can better track your customer data. Social media can streamline customer interactions with your business, keep up with trends, learn what customers want, and forge more personalized relationships. Research which technologies integrate with software your business is currently using to increase productivity without spending thousands on a complete overhaul.
Decreased employee morale
Employees contribute to the success of a company. One of the biggest challenges companies face during a period of excessive growth is a decrease in employee morale.
Often times when companies experience quick growth, they undergo internal restructuring. If the right processes aren’t in place or have yet to be established, restructuring can result in cross-departmental disorganization and employee burnout.
Because culture plays a large role in employee satisfaction, disorder amongst the executives and leadership teams can create a negative impact on employee morale.
Establishing a strong management team can prevent a lack of leadership, attainable goals, and recognition decreases employee engagement, lowers morale, and creates high turnover.
Losing sight of cash flow visibility
If a surge of growth has caused high employee turnover, cash flow visibility can become vulnerable. Those who once were in charge managing or overseeing cash flow may be gone. Maybe no one has taken over the role, or there’s a lack of communication among the team regarding who should be managing cash flow.
Because cash flow is the lifeblood of a business, cash flow management should be a priority regardless of what stage the business is in.
Employing more people than you can afford
Rushing to hire more employees in an attempt to force growth can be detrimental to any business and lead to layoffs. From having to provide training and employee expenses such as benefits, leave pay, and holidays, over-hiring is costly.
Fractional hiring enables fast-growing companies to fill crucial roles with experienced professionals, on a part-time basis, without the risk of hiring too many full-time employees too soon. By utilizing fractional hiring during a period of aggressive growth, a company will have more resources which will allow them to invest in other areas of the business.
Signature Analytics can work with your team to prevent aggressive growth from destroying your company and ensure your growth continues to be is sustainable. Find out how by requesting a free consultation today.