7 Risks that Come from Scaling Your Business

So you’ve launched a business and you’ve gotten a taste of success; you’re thinking you may be ready to start scaling up, taking your business to the next level and driving revenue through the roof. But as you grow, your resources and investment has to scale proportionately, and you need to ensure your infrastructure and organizational systems can handle the scaling. If you aren’t adequately prepared for the scaling up process, you could risk your entire business. Consider the following risks that are associated with business growth before initiating any measures to scale your startup.

1. You’ll work long hours. Many entrepreneurs struggle to find work-life balance, and if you’re already feeling the weight of the enormous amount of time, effort, and energy it takes to generate and sustain business, remember that it will take just as much work to scale up every step of the way. Growth doesn’t happen overnight, so you’re bound to be working overtime for quite some time before you start seeing results from all that investment; even hiring an entire team to help you out won’t get you off the hook for giving it all you’ve got to grow bigger and better.
   


2. Your existing customers may feel alienated. In order to scale your business, it’s going to be necessary for you to divert a lot of time, attention, and resources to growing your audience, exploring new markets, and attracting new customers. Chances are good that your loyal customers — the ones that have brought you all your success in the first place — have come to expect a certain level of customer service, and they may be frustrated by changes associated with growth. Especially if your business’s scaling means developing new products, existing customers may worry they’ll miss out on the original draws your business offered.


3. You may be caught in the tide. According to Entrepreneur, “many rapidly growing businesses get burned by investing in more capacity and taking on higher fixed expenses, not realizing that their growth may be a temporary thing.” As the old saying goes, it’s critical that you don’t put the cart before the horse; make sure you’ve got a solid system for predicting demand, sales, and trends and that you have a plan for adjusting both fixed and variable expenses to stay profitable regardless of market fluctuations. Of course, it’s not really about being able to predict the future; it’s really just about having flexibility built into your business plan to protect yourself should you find yourself caught in a tidal market.


4. You may expose yourself to legal issues. Scaling up usually necessitates hiring more employees, which opens the door for human resources related legal issues. Depending on the number of people you employ, you may be legally required to offer health insurance and other benefits, and laws vary widely regarding hours of work, breaks, downsizing and layoffs, and other employment rights issues. As your business grows, it will become more and more necessary to understand how the employment law system works to protect yourself, your employees, and your business.


5. You may have to loosen the reigns. If you built your company from the ground up, it may be a real challenge to accept the fact that the management and leadership structures that worked well for your team of 25 doesn’t work quite so well now that you’ve grown to a staff of 250. Scaling up brings challenges that may require adaptations to your leadership structure, up to and including loosening the reigns on your business and delegating tasks to people more qualified than yourself in specific areas.


6. You’ll eventually have to trim the fat. Too many entrepreneurs make the mistake of believing growth means upward, outward, bigger, and more; in reality, scaling means outgrowing, shifting, and changing things up. That means you may find strategies that no longer work, departments which are no longer efficient, and even staff members who don’t fit the company culture or cause unnecessary setbacks and controversies. Accepting that not everything will work and that sometimes you’ll have to cut ties will help your company transform.
   


7. You may be at increased risk for cybercrime. Growth can be a double-edged sword when it comes to cyber security, since more employees means more potential avenues for hacker infiltration and because hackers are naturally more attracted to more successful enterprises. A 2016 Ponemon Institute report found that employee negligence was the top concern for more than half (53 percent) of businesses as it relates to data breaches. If you don’t find ways to ingrain cyber security into your company culture, employees may accidentally expose your business to enormous risk.

If you’ve been debating whether you should take steps to scale your business, be sure you’ve mitigated the potential risks of doing so as much as possible before investing the time, energy, and money it will take to grow.

Source: B2C