Rapid growth is most business leaders’ dream. But if it’s not handled correctly, it’s not just a mixed blessing; it can be a business’s undoing.
Scale inevitably brings increased complexity and unfamiliar challenges. For some, these prove overwhelming. Growth stalls or even reverses, and the business’s potential remains unrealised. Others, however, absorb the strains that scale brings, build capabilities and processes to overcome the complexities, and enjoy enduring success.
The secret to fast, sustainable growth varies from business to business. Culture, talent and systems all play a part. S&W’s report with the UK Fast Growth Index earlier this year explored some of the factors across Britain’s fastest-growing businesses.
The causes of failure, however, are often common between businesses. Avoiding these pitfalls doesn’t guarantee a business will rapidly scale, but it does give them a better chance of success.
Counting the cost of growth
Perhaps the most obvious danger, particularly in the current climate, is the pursuit of growth at the expense of profit. Chasing turnover without the essential check on its profitability can quickly cause problems. A big win may turn out to be a Pyrrhic victory.
In many cases, of course, such as fast-growing fintech firms and venture capital-backed businesses, scale is the precondition for profitability. Organic growth is not an option early on in some markets. In other cases, however, the pursuit of revenue over profitability is unplanned and won’t be resolved by achieving scale.
That can happen for various reasons. It’s often a result of trying to reach revenue targets. Equally, it may be down to an effort to win a key client or break into a new market. Again, this may be a necessary strategy for some businesses. It may be essential for building capabilities or credibility.
Nevertheless, it is a risk, as with borrowing to fund growth needs, and it must be recognised and taken with eyes open. Growth plans must be backed with good data, a clear view of the company’s finances and cash flows, and robust forecasts and scenario planning to inform the decision. Trusted advice, and an outside, objective view can also help provide a sense check to ensure that scale is also success.
The right people, at the right time
People, as well as profits, are essential for sustainable growth. Wishful thinking will only take a company so far, and having the right staff in place to manage increasing scale without undermining execution is vital.
The right people and mix of skills required also change as a business grows. Recognising where skills gaps are emerging, before they undermine effective operations, and where founders or founding employees need to relinquish control of aspects of the business, is a key skill.
Moreover, as businesses scale, systems, processes and culture must increasingly take the place of founders in delivering the execution and service levels underpinning initial success. As Conrad Ford of UK unicorn Allica Bank says, “Culture is what happens when you’re not in the room.”
Both talent and embedding the beliefs and behaviours responsible for early success into the organisation are essential if it’s to continue.
Quality and compromise
Finally, quality and service are closely related to these issues. The desire to grow cannot outweigh the ability to deliver. The Fast Growth Index report confirms that “customer obsession” and the ability to deliver consistently even under pressure are both non-negotiables for the most successful businesses.
Few businesses would argue against the importance of maintaining quality and service levels in theory. In practice, however, businesses growing rapidly can find their commitment tested. Opportunities for growth and expansion often outpace existing capabilities to deliver.
The temptation at these times is to seize the opportunity for growth and find a solution, such as hiring additional staff, to address capacity shortfalls afterwards. Sometimes the risk pays off, but you may be wagering what you’ve already built.
Ambitious business leaders pursuing growth are often relentless in pushing forward. The reluctance to slow, when a firm has over-extended itself, is understandable. But growth cannot come at the cost of the very things customers or clients have put their faith in. The essential ingredients that fuel early success are those that will enable it to scale profitably and sustainably. Identifying and nurturing these is the best recipe for long-term success.
With offices in Edinburgh, Kirkcaldy, Stirling and nationwide, S&W works with some of the UK’s fastest-growing businesses and their owners. We combine a passion for our clients’ businesses with a huge breadth of experience, working with thousands of businesses in Britain and abroad. With local offices and world-class expertise, we help firms, their owners and their families avoid pitfalls and achieve sustainable growth and long-term success.
Across tax, accounting, audit, consultancy, corporate finance, restructuring and recovery, we help clients navigate complexity, seize opportunities and achieve their goals. Discover how we can help you navigate whatever challenges your business may face. Start the conversation with Graeme Miller today.
