Who doesn’t want to be part of a fast-growing business?
Rapid growth, however, can spell the downfall of your company if your backend operations are not in order.
Like many entrepreneurs, I have two personality traits that sometimes detrimentally affects my performance in business:
- I can’t sit still, always needing to be active
- I like to move fast, leaping into the unknown
While it’s important to be able to move fast in business – making quick decisions and getting on with things – too much speed can have the opposite effect. It’s not uncommon for a new business to grow at such a rapid pace at the ‘frontend’ (i.e. the demand for your goods or services) that it outpaces backend operational support and the business collapses on itself.
At first, it may not seem logical that growth can cause a business to collapse, but think about it for a moment. Products don’t appear magically out of thin air. They don’t find their own way to your warehouse or store shelves, or in an email to your customers.
Services are often limited to the available hours you or your team have – as a result rapid growth can lead to compromising your brand through poor performance or lack of quality assurance measures.
Put simply, a growing business presents problems and challenges that many an entrepreneur doesn’t anticipate.
Does my backend look big in this?
The first business I started grew faster than I had planned. The first few years were manageable, but as my confidence increased (some would say my cockiness was at an all time high) and the ideas started flowing, the business started picking up pace at a rate that began to outgrow not just my backend operations, but my skills and knowledge in the art of business.
To further complicate matters, it wasn’t just my operations that were challenged. My suppliers were having difficulty providing me with products and my warehousing/shipping partners (services that I had outsourced) were facing their own difficulties in managing the accuracy of my customer orders.
Confusion reigned, orders were incorrectly filled, or not filled at all, and what followed was a big mess that resulted in the eventual demise of my company.
After the dust settled and I came out of my depressive hole, I decided to suck it up and face reality. Yes, the business idea was good. Yes, the business did have the potential to turn into a very successful venture. But I was simply too narrow in my focus. I looked exclusively at the future big picture of success and wealth, rather than living in the now, planning, strategising and thinking about every move I took.
It was a costly but valuable lesson.
How to avoid making the same mistakes I made
The business I started was based on a simple idea: sell textbooks and various university materials to fellow students in my course via an e-commerce site.
The idea was embraced by my classmates and word eventually spread to students doing similar courses at other universities.
Based on the growth I saw in one course, and without doing any research or talking to my publishers/suppliers, I then made the decision that I was going to tackle bookshops head on and supply every known textbook on one easy-to-use website.
After months of toil and hard work the newly designed website was launched. It had well over 10,000 text book titles online. It had all sorts of funky functionalities and we offered freebies and show bags to entice students to buy from us.
Thanks to a combination of word of mouth and a marketing campaign, the launch of the website saw sales go far beyond my expectations. To put this into context, the first six weeks saw more sales than what I had forecast for the first year. And so, as explained previously, the business boomed and then fell flat on its face in a tangled mess.
In my mind, this is what was going to happen:
In reality, this is what *actually* happened:
So what went wrong? The answer is quite simple really: I lacked the patience and foresight to properly plan and strategically implement. As you can see from the second image, reality is often quite different from what we imagine. By taking the time to plan, questioning every step of your business processes, you can make yourself aware of potential problems before it’s too late.
The advice I have for any entrepreneur is to take the time to understand your business and your market, ensuring you have realistic expectations. Whilst it’s important to understand spreadsheets and know that your business is going to be profitable, you must NEVER forget about the backend of your business. If the backend isn’t in order, no matter how many sales you have, chances are you’ll struggle to stay afloat.
Peter Spinda is an entrepreneur, author and consultant, who runs a regular business blog on his website www.realitiesofbusiness.com