I know, it sounds like a nice problem to have. But growing too fast can put a strain on your personnel and infrastructure. This is true whether you have a product-based or service-based business. Here’s what you need to do in order to guard against this business-crippling possibility.
Here’s the podcast episode:
Or if you’d rather watch the video:
And here’s the transcript:
Hi, I’m Ruthie, owner of Defy The Status Quo, and you’re listening/watching an episode of The Defiant Business Podcast, your Monday to Friday, 10-minute shot of business knowledge. So, let’s get into it.
Today we’re going to talk about growing too fast. Yes, it is actually possible for your business to grow too fast. I’m sure you’re thinking “Ruthie, why are we talking about growing too fast? I’m growing too slow! I want to grow faster.” And it’s because growing too fast can happen quickly. It can happen fast, and it can catch you unaware.
All of the effort that you’re making right now could result in rapid growth for your business:
- Following up on leads
- Knowing exactly where you need to be in terms of marketing
It could happen in an instant and you have to be prepared.
Setting Proper Limits
There are certain things that you should put in place and certain decisions that you should be prepared to make in order to keep your business from failing due to rapid growth. The reason is your current infrastructure. Your current business infrastructure and processes could crumble under the pressure of too many requests or too many new clients.
So let’s set it up for a B2C or B2B product and service. Let’s say you run a small eCommerce business. My advice to you is to set an “orders cap”, or to make sure that when customers submit orders, it’s a smart program that takes into account the orders that have already been submitted. It should allow you to enter in how long an order takes for processing. That way, you can avoid too many orders all at once.
[Not in the podcast] Additionally, you can make sure that your interface shows the customer when their order will likely ship based on your current order level. If it tells the customer that the wait is 30 days, and they still choose to make a purchase, at least they’re prepared.
You might be thinking “Oh, in what scenario would that actually happen?” A lot of eCommerce businesses, especially the ones who target women, will use Pinterest as a means to funnel traffic to their store.
This is great because Pinteret’s primary user demographic is women, at around 75% [correction: 81%!]. So, a great place. If you’ve got products for women, you should probably be on Pinterest, but that’s another conversation for another time.
Let’s say you have a take-off for one of your already popular items, and orders flood your store. Boom. Your infrastructure crumbles. What you end up with is a bunch of unhappy customers, because you do not have the people and resources to process their orders in a timely manner.
The Amazon Effect
The Amazon effect has caused us to expect our products in two days or less. It’s unfortunate for these smaller businesses because now you’re expected to keep up with the Amazon standard. What do you do?
Bad Reviews Do Not Disappear
Along with that flood of orders and those unhappy customers, the reviews start to pour in and they’re not good. You can kind of see where this is going. They’re like “Oh, I put in my order and they said it’d be there in a week, but it’s already been two weeks and I’m so upset.”
It’s not the customer’s concern and it’s not their fault if you don’t have the infrastructure ready and in place to keep up with the demand for your products. These types of reviews will be incredibly hard to come back from, based on where they’re placed. If they’re placed on Amazon or on Google reviews, those are really hard to come back from.
You can respond to them, but you can’t take them away, so it’s better to kind of set your business up in such a way that you can prevent that.
Case Study: Death Wish Coffee’s Close Call
How do I know that this can happen? Death Wish Coffee. It’s incredibly hard to find any information on it online. But lucky you, I found a podcast episode that mentions it in the show notes.
Here’s a basic rundown of what happened. Good Morning America did a show on Death Wish Coffee, and their business almost crumbled due to the flood of orders and unhappy customers that they ended up with. The owner didn’t have the staff, packaging, order processes, or capacity to handle the stacks of orders.
The owner, Mike Brown, recruited his friends to help him fulfill orders. He had to fight to get ahead, so it makes a great comeback story. But it’s certainly not an ideal scenario. Could you imagine trying to give refunds for thousands of orders, because you weren’t able to deliver them in a timely manner?
With Returns, Everyone Gets a Cut. Well, Except You
Now you’ve got all the stuff that you take into account when you’re trying to ship those orders and when the orders are processed. All the payment processing apps and platforms take their cut. Well, when you have to give the refund, you don’t get a cut.
Rather, you don’t get a refund on your cut. Let’s say your product is $15 and the platform deducted a couple of dollars from you before giving you the rest of the money. You still have to refund the full $15. Imagine the thousands of orders. So you got $13, but you have to pay back $15. That’s a lot of money. So you have to keep those things in mind. That’s why an order cap, and making sure you have a smart system in place, is a really good idea if you run a product-based business.
All right, service business. You’re wondering “Ruthie, really? How are you going to direct this towards a service business?” It’s not as big. I think it doesn’t have the potential to be quite as big with a service business, because service businesses, like myself, work with clients and the business. The buying cycle is typically longer.
A Surge of Interest Is Not A Surge of Profit
Let’s say you have a web design agency and you landed a huge client. You did amazing work, so now you’ve got them in your portfolio. You did a case study. You’ve been promoting the case study, and business is pouring in (or at least business interest is pouring in). Everyone wants to work with you. Now everyone in that industry wants you to make their website look amazing too. They want you to bring that energy and turn their business website into something exciting. Because why wouldn’t they? Nobody wants a boring website.
Decisions Snowball in Number, Complexity, and Importance
But you can’t build proper infrastructure while you’re rushed. So you have to consider if you need more admin people or designers. Do you want to do content in-house or do you want to outsource it? Do you want to offer full web design and content, etc. So then you’d have to consider content in-house or outsourcing content to a partner.
If you try to do this while rushed, you’ll settle for poor talent or at least talent that wouldn’t be up to your ideal standards if you weren’t rushed. When you’re a small business, and you’re trying to create these sorts of partnerships and bring in new employees, you really need everybody to pull their weight.
The quality of work that you will put out because of these sorts of partners will be lower. Then, that kind of brings your brand image down. You may not be in a position to lose as much money as a service-based business [when compared to a product-based business]. But you could lose a lot in reputation just from one or two bad employees/outsourced partners.
Learn to Say No or Take Responsibility
So my recommendation to you is to either turn the work away, or be accustomed to talking to these prospective clients, even if you’re full up, and letting them know when you’ll have the capacity to take on their projects.
Don’t tell everyone that you can do their projects right now. That’s our inclination. We want to make our clients happy, but they’re not going to be happy if we’re unable to do a good job. So if you see that business is starting to pick up, what you need to do is project out that calendar.
Include Employee Assessments
Also, add assessments if you want to hire employees or develop outsourced partners, in terms of your business management and business growth. However, work on those relationships at a pace that allows you to really assess their work, and assess whether or not they’ll fit into your business structure and your business team.
So I think now you can kind of get it. Yes, you can grow too fast, and it’s not a good problem to have. If you grow too fast, you could destroy your reputation and that will make it almost impossible for you to do business. So keep those things in mind.
We are coming up on the end of the first season of The Defiant Business Podcast, and we’ll be taking a one-week break. But once that’s over, we’ve got a special guest for you. We’re going to be featuring this special guest throughout all of the next season, periodically about once a week.
I think you guys are gonna love what they had to say. I’ll be revealing more details in the final episodes of season 1. Thanks for being here with me.