6 Common Mistakes Founders Make When Scaling their Businesses

August 1, 2017

5:00 pm

The path to scaling a business is lined with its fair share of unforeseen obstacles. For all the unknown and unpredictable challenges that exist, there are just as many easily avoidable missteps founders tend to make on the road to achieving growth.

In business, there will always be rough patches to weather and growing pains to push through, but I see far too many founders struggle unnecessarily through problems they’ve often created for themselves. The following are six common mistakes founders can easily avoid as they scale to new heights.

Doing Too Much Too Soon

Founders are typically visionaries with big ideas, and they want to make all of them come to fruition. But if you go too broad, it inhibits you from making meaningful progress in any one area of the business. Instead, you get mired down working only on building idea after idea.

In the early stages, pick one solution and give everything you’ve got to getting customers. Attracting and keeping paying customers should be at the top of your list, no matter how brilliant you think your next product iteration might be. After all, without customers, it’s not going to stand a chance anyway. Plus, once you’ve got a solid base of customers, you can test your new ideas with them to validate whether they’re worth pursuing.

Hiring Friends and Family

I see this mistake happen over and over. When founders don’t have an extensive talent list, or have never dipped their toe into recruiting, it’s tempting to hire who they know to simply fill seats. This is how an entrepreneur’s aunt who took one marketing class ends up as CMO. This is a surefire way to build a faulty foundation.

Instead of handing out jobs to your relatives and college roommates, find good recruiters and work with them effectively. Seek out people who are currently employed, and successful in their area, and share your vision with them. It could take months and numerous meetings before you get someone qualified to buy into the work you’re doing, but finding the right people is worth it. The old saying, “hire slow, fire fast,” should become a golden rule within your organization.

Choosing the Wrong Talent to Run the Business

With solid talent sitting in the right seats, it’s time to take a critical look at your executive layer. One of the biggest mistakes I see founders make is choosing to be the CEO and never considering another option. Even if the company and its IP is your brainchild, this doesn’t automatically make you the best candidate for the CEO position. It’s not easy to take a critical look at yourself and your cofounders and truly assess whether you’re qualified to be in that seat.

If massive growth is part of your game plan, it’s imperative to look at your skill set and passions. Ask yourself: if you have what it takes to lead as the CEO? Do you love all of the responsibilities that come with that role? If you avoid answering these questions objectively, you could end up getting in the way of your business’s success.

Be just as judicious with the rest of the C-suite. Every leader in your business must be chosen with great care, trained extensively and then given autonomy to manage their own department. Company leaders should absolutely work together as a team to accomplish a singular vision, but ultimately each has to be trusted to make decisions on their own and be accountable for them.

Founders sometimes make the mistake of hiring junior people to fill these leadership roles because they think they can’t afford someone more seasoned (or feel threatened by someone with more experience), but you’re doing your company a disservice if you’re not filling these positions with the cream of the crop. Even if you can’t afford the asking price of a valuable VP of sales, you can certainly still make an attractive offer by adding in more equity to the deal, giving them a bump the next year or just negotiating feasible terms.

Underestimating Time and Budget

Founders tend to have an eternal sense of optimism. This is great for morale and seeing a vision through, but it’s more of a handicap when it comes to projecting revenue and time frames. Entrepreneurs notoriously end up thinking that building their business idea into something truly viable will take less money and less time than it actually does. One mistake is being too aggressive with projections and end up disappointing everyone (yourself included). Instead, set realistic expectations, along with a budget and time table that works for everyone and is attainable. And consider that you are likely not charging enough.

Failing Slowly

Innovation and iterating on what’s not working is essential to remaining competitive, but the minute it becomes clear that this new tack isn’t working, move on. If 20 clients tell you there are flaws with what you’re doing or it’s too expensive or too hard to implement, let it go before you lose more time and money chasing it. Let go of your attachments to new ideas and keep in mind, you don’t have to make revenue back the same way you may have lost it as it tends not to work out.

Always Meeting On-Site

Few people work as hard as those who are launching and growing a startup. But all that time and energy spent in one (typically small) space can create tension and inhibit productive, important conversations. I recommend at least once a quarter (or ideally once a month if you can) gathering the leadership team, and meeting somewhere off-site for a half or full day. This should be a time to air grievances, come clean about what’s limiting or upsetting you and working through it all together. Being in a new space, away from listening ears, creates an environment for honest conversations about the health and future of the company to take place.

Scaling a business is not easy work, but keep in mind, many of the obstacles can be avoided in the first place.

Read more tips about hiring the best talent for your startup at TechCo

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Todd Belfer is managing partner of Canal Partners where he is responsible for all aspects of the company including identification of potential acquisition targets, due diligence, financial analysis and final investment decision making. He has a long history of entrepreneurship and has been involved with a wide range of businesses throughout his career, currently serving on the board of directors of more than five companies.