Guest post by Alex Daintith.
While growth is the primary objective of most B2B businesses — or any business, for that matter — there is such a thing as scaling too quickly. Growing at a rate you can’t sustain or manage is likely to have multiple negative consequences, and it’s often the result of a lack of planning, an incomplete or incoherent strategy, an oversimplified view of the market, an overestimation of the business’s own capabilities, or a combination of these factors.
The key to success, of course, is to ensure steady, sustainable growth that can keep up with the demands of the industry — though that’s easier said than done. Through careful planning and prudent decision-making — taking into account market conditions, customer needs, and the company’s own limitations — B2B businesses can scale effectively, ensuring their growth is managed properly and avoiding the pitfalls of scaling up too rapidly.
This post details the telltale signs your business might be scaling at an unsustainable pace, and provides five expert tips for avoiding this all-too-common situation.
Signs Your Business is Scaling Too Quickly
It can be hard to know whether your business is growing at a rate it can’t sustain, and an untenable situation may develop without you realizing it until it’s too late. However, there are a number of “red flags” to look out for, and the appearance of these may indicate that your business will run into trouble in the near future because it’s growing too rapidly. These signs include:
- You’re failing to meet your targets: All businesses will have their own measures of success — revenue, acquisition, retention, among other metrics — but if you’re scaling too fast you’re likely going to struggle to meet these. This may be because you set unrealistic targets by failing to fully research the market or indirect competition.
- You’re frequently at full capacity: As a B2B business leader, you’re likely to find yourself regularly reaching — or exceeding — your full capacity. A good rule of thumb is that if you’re at around 80% capacity, you’re in a position to scale. If you’re already pushing 100%, however, you’re doing it too quickly.
- Your workforce is suffering from burnout: A telltale sign that a business is growing too swiftly is that its workforce is stretched to its limits. This will only lead to burnout among employees, which may then result in a lack of engagement, increased absenteeism, an overall dip in productivity, and talent retention problems.
- Clients are unhappy with your service: B2B customers expect a high level of service, but a business that’s growing unsustainably is unlikely to be able to deliver this on a consistent basis, leading to dissatisfaction from its clients. If they’re not happy, they’ll let you know about it. Or just take their business elsewhere.
- You’re experiencing cash flow issues: Growing too quickly can put a strain on a company’s finances, leaving your business cash-strapped and increasing the risk of insolvency. In a worst-case scenario, this could result in the business struggling to pay its operating expenses, its suppliers, or its employees.
How to Avoid Scaling Too Quickly
Identifying the signs that your B2B business might be scaling too rapidly is one thing, but how can you avoid it before it’s too late? This requires taking a methodical, step-by-step approach to ensure you’re not taking on too much, too soon, creating unrealistic expectations and demands in the process.
Here are some specific actions you can take to protect your business from the pitfalls of excessively hasty growth:
1. Make data-backed decisions.
An overly ambitious or unrealistic scaling strategy often springs from a decision-making process that relies on assumptions, guesswork, and misplaced convictions. Businesses that scale too rapidly frequently fail to understand market conditions, misinterpret demand, and misjudge the needs of their customers.
Instead of making growth decisions based on instinct or “gut feeling,” you should be leveraging real-time data about your market and your customers.
Using an analytics platform such as Tableau enables you to measure KPIs and display insights on an easy-to-use dashboard, then use these findings to create an informed growth strategy, encompassing analysis of competitors, customer acquisition and retention rates, win-loss ratios, and of course, revenue.
2. Recruit only when you really need to.
Often a consequence of unsustainable scaling is a poorly-thought-out recruitment strategy. B2B entrepreneurs who believe they’re growing faster than they can manage may be “panicked” into recruiting at speed and en-masse to plug gaps, while others who have unrealistic expectations about their business’s growth potential may get a little overexcited and take on more new recruits than they end up needing, rather than building a team strategically.
Either way, this is likely to lead to an underskilled or imbalanced workforce, which will have a compounding effect on the business’s potential to grow at a steady rate. One way to avert this is to outsource key projects to temporary workers rather than committing to taking on permanent employees.
Using an independent contractor (such as a B2B marketing consultant), for example, affords businesses the flexibility to call on specialist talent as and when needed. If you’re wondering about how to pay an independent contractor, check out Remote’s guide to paying independent contractors.
3. Prioritize offering value over volume.
The logic is that by increasing the scope of products and services they offer as well as the number of clients they serve, B2B startups can accelerate their growth and challenge their industry-leading competitors.
That’s all well and good if you have the operational infrastructure to support such an approach, but many startups don’t—and that’s why your priority should be delivering value to your current B2B customers, before you think about expanding your client roster or offering additional services you may not be able to deliver.
To avoid skimping on quality and customer service — which is inevitable when your business is spreading itself too thinly by trying to satisfy a growing number of B2B clients — ensure you only offer those services you know you can deliver to a high standard.
Furthermore, don’t make unrealistic promises as a means to attract new business if you know it’s likely to stretch your team beyond its capacity. Instead, ensure you’re offering genuine value, and ensure your existing clients are content with your offering before onboarding new ones.
4. Scale one area at a time.
Often, an unmanageable scaling rate is simply the result of trying to do too much at once. It can be tempting to throw your weight behind a number of growth strategies in the hope that a wide-ranging approach will enable you to scale quicker, but in reality it’s a risky tactic that is more likely to result in you struggling to grow your B2B business at a rate you can control.
Rather than trying to scale everything at once, take a piecemeal approach. Create a step-by-step plan, and prioritize scaling the areas you think will have the biggest impact.
For example, rather than carrying out a recruitment drive, ramping up your marketing activity, scaling up your office space, and investing in new software all at the same time, analyze the benefits, challenges, and costs associated with each, and determine where to focus your efforts first. And remember, use data to inform these decisions.
5. Know when to scale back.
You may already be feeling that your business is growing at a speed it can’t sustain, but that doesn’t mean it’s not possible to bring things back under control.
It’s not going to be easy to do that without making some tough decisions, of course, but knowing when it’s time to scale things back can avert a complete catastrophe: short-term pain is inevitable, but the long-term gain will be a business that can grow sustainably in future.
Letting staff go is an extreme — and difficult — decision to make, but it may not come to that. First, analyze where your cash is being spent, and try to identify any areas you can cut back. Are you paying for software you’re rarely using? Are you renting an office when you could be allowing staff to work remotely — like these businesses are? Are you overspending on third-party agencies?
Scaling back doesn’t necessarily mean curtailing growth, but it will help to slow it to a more manageable rate.
In Conclusion
Every business leader knows the importance of scaling, but it’s also essential to understand the risks associated with doing so too quickly — and to be able to spot it happening before it’s too late. Sustainable growth is the goal, of course, and that can only be achieved through careful planning and data-backed decision-making.
Alex Daintith is a creative content writer hailing from the Northwest of England. He loves to muse on a wide array of topics; from ecommerce and technology to the natural world — we dare you to find a subject he isn’t capable of writing about. In his spare time, you’ll find him pottering in his garden, or plinking on the piano.