“Go big or go home” is an often-said mantra for growth, but this statement ignores the dangers of premature scaling. While an unbridled spirit is often what fuels startups to pursue their innovative goals, that mentality can also lead to their deaths.
Over time, a startup’s vision grows, as does the demand for its product—which means other aspects of the startup need to scale as well. As a business owner, you may have to start increasing the number of employees, your marketing reach, the size of your office, and more.
Growth is inevitable, but how well you manage your growth will determine whether your business thrives or meets its demise. Startups often start out tiny but mighty, but premature scaling can take away their responsiveness.
In fact, the reason that many startups fail is that they scale up too fast, too early. They have good intentions with misplaced priorities. For example, you may be hiring lots of good people, but if you hire more than you need, you will incur too much cost.
Such an error is most likely due to not understanding the nature of a startup. Because a startup is a business fueled by an innovative idea, a startup is a build-a-plane-as-it-flies operation. Basically, startups are banking on unknown opportunities.
In contrast, established companies have a clear understanding of the product they are selling, and thus scale according to the market demands of that product.
Taking a Look at a Scaling Startup: Hampton Creek
Like many food tech start ups, San Francisco-based Hampton Creek seeks to revolutionize the food industry. Among the biggest players that are food tech startups are subscription box services that offer home delivery of fresh ingredients, as well as companies that are producing alternative ways to consume nutrients.
Hampton Creek falls under the latter. The company focuses on reinventing products that are often loaded with food additives, processed ingredients, and common allergens like milk or eggs.
It may sound impossible to remove a key ingredient like eggs in a food like mayonnaise, but Hampton Creek does just that.
The company’s eggless mayonnaise alternative Just Mayo has made headlines and gained positive customer reviews for tasting just like mayonnaise. The creamy texture is derived from a yellow pea protein. Hampton Creek offers dozens of more products that are also gluten-free and without GMOs (genetically modified organisms), including salad dressings, pancake mix, and cookie batter.
The heart of the Hampton Creek startup—producing off-the-shelf food items that are healthy, affordable, and available—has won over many people. That’s why the company is scaling fast. The products are hitting more retail locations and thus gaining a bigger following.
It’s natural for a startup to want to ride the wave of enthusiasm, but Hampton Creek, like many startups, is aware of doing too much too fast. For example, it’s common for a startup to want to develop more products to fulfill its mission and demand. Hampton Creek expects to release an eggless scrambled egg mix sometime in 2016—but interrupting the scale of sustainable growth can do more harm than good.
Again, if you expend a lot of energy, even on something good like marketing your product and hiring good employees, you will experience premature growth you fail to prioritize your decisions well.
Avoiding Premature Scaling
Hampton Creek is acutely aware of the complexity of scaling, especially when it comes to the operations of the business, but it won’t let those challenges scare it from executing its original mission.
One of the most common challenges with scaling a startup is hiring people that match your culture. In a recent interview, Hampton Creek CEO Josh Terick described how he determines the people to hire as the company scales up:
There’s an element of boldness. … I want people to embrace that.
Hiring well, based on a company’s culture and needs, is a practice that companies must implement to scale smoothly.
Another challenge that startups must understand is how business operations affect growth. As the number of employees increases, you may need a bigger office. The wrong layout or facility can negatively affect the way information flows throughout the company; good communication is part of maintaining thriving business culture.
Those who create startups are not strangers to hard work, but tempering your passion with strategy ensures that your company continues to serve and scale its original mission for years to come.
Dana Davis
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You make an excellent point when suggesting that startups scale appropriately. By incurring too many expenses, they can outgrow their means and make the business unsustainable.
Thanks for expertly covering such an evergreen subject Dana!
And sadly, just like you’ve shared, far too many aspiring and other wise,
extremely capable entrepreneurial Start Ups, fall victim to the exact process
you’re describing.
And lots of time their ambition, far exceeds, both their readily available capital
and real world experience!
And before they realize it, the realities of far too rapid growth, becomes an albatross,
instead of a stepping stone!
Thanks for making us aware, of the all too real potential downside, of too rapid growth!
Mark would love you to read ..Three Profitable Reasons Cash Strapped Small Business Owners Definitely Need Proven Systems!
Well written article. It is essential to avoid such pitfalls to stay in the game and keep growing to a larger company. Kudos for this informative post!
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I think you missed a little something you could have added. Create a blog related to the service that you’re offering, such as this Growmapblog . Yes, creating quality content takes time but if you can generate large scale quality content there’s nothing like it. Just my take on this.
Excellent article otherwise.
Hi Tony,
I have to agree with you. Even though this blog doesn’t really make money or even get the traffic it once did, it served the purpose of sending me so much work I barely have time to focus on blogging.
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Entrepreneurs should know the right timing to grow or expand their business. Larger business is likely to be more complex, demanding and time-consuming. It will probably require greater commitment.
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Premature scaling is one of the most consistent predictors of startup failure and it is something to be afraid of. You are sharing very useful information for the startups.
I totally agree that scoping out potential employees whose cultures mesh well with the company is essential! However, it’s important that you have a diverse group of employees working for your company in order to ensure that there is a wide variety of personalities, ideas, and perspectives present and ready to take on tasks. Nice work here! Thanks for sharing!
Morgan would love you to read ..Segregated Schools Nearly Doubled From 2000
I totally agree that scoping out potential employees whose cultures mesh well with the company is essential! However, it’s important that you have a diverse group of employees working for your company in order to ensure that there is a wide variety of personalities, ideas, and perspectives present and ready to take on tasks. Nice work here! Thanks for sharing!
Morgan would love you to read ..Segregated Schools Nearly Doubled From 2000
Hi,
I never thought that scaling up too fast is a major cause for failing. I always considered hesitating to scale up is a much more common cause, and particularly here finding the right technology for the business. When growth sets in and scaling up becomes necessary, things often have to adjust quickly, which can be a problem for operating the business.
But anyway, thanks for pointing this out. At the end of the day, it’s all about making experiences and learning from one’s mistakes.
Trying to scale too fast can result in major cashflow issues and customer dissatisfaction if you take on more than your current team can handle. It takes time to train people and get processes working smoothly. Growing too fast is a major mistake especially for a service business.
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You have used nice title. Yes of course we should avoid premature scaling. Thanks for sharing this article.