Scaling is one of my favourite topics to talk as I have closely observed clients' businesses failing or struggling while scaling without planning. Without in-depth analysis of own business plan and understanding strengths of competitors, a decision made to scaling up the business could lead to huge losses than profits.
The greed to grow as big as possible in minimum time period without a strong foundation and plan can lead to unexpected disaster. Every start-up or growing organisation has a vision and wants to go to the next level and many times entrepreneurs tend to scale their business in haste without a thorough plan and grow 'too fast, too quick' with a very high cash-burn rate.
One of our former clients, I would call it company A, whom I started offering consulting over a decade ago, grew from $ 250,000 annual revenue to $ Multi-million annual revenue in just a few years time period. Company A's core team was expert in offering high quality services at real estate development projects. With an aggressive entrepreneur steering the company, the company was bidding on projects and gaining numerous real estate construction projects in a very little period of time.
Initially, it was looking prettier but as there was no strategic action plan in place and no regular situation review in place, the time when company A started gaining numerous projects with as many as 5 projects running at a time, without a plan of hiring enough number of workers, people leaders, project managers and financial review, the end quality and margins started declining. As we were analysing financial reports and tracking company's revenue, increase in number of back-charges by real estate developers and project management companies were the very first indication of "scaling without planning" problem to us. Not only back-charges, when we analysed material cost, we figured out six figure amount of overcharge by suppliers because of delayed payments from company A and no distribution of promised price-difference credits. A highly successful company lost its well-reputed name and faced legal challenges and within few months ended up in to closure.
When we offer consulting to our clients after reviewing an existing business plan or analysing growth, we conduct a thorough SWOT, Financial, Customers perspective, Operations and 5 Forces Analysis and sit with our clients to ensure they have a clear strategic plan to achieve a clearly defined vision. A business can be highly profitable at a smaller scale rather than taking a bigger leap without a strategic plan. So we always advice our clients "Do scale but ensure you have a strategic plan to not-to-fail".
