In 2014, an entrepreneur named Ryan Grepper attempted to fund a project called the Coolest Cooler on Kickstarter. Grepper’s goal was to raise $50,000. Instead, he raised more than $13 million from more than 60,000 backers. Seemingly overnight, Grepper had far more funding than he thought he needed — and more than 60,000 coolers to deliver.
The Problem With Rapid Growth
At the conclusion of its funding campaign, the Coolest Cooler was the most popular product in Kickstarter’s history. To ship the rewards that he had promised his backers, Grepper would have to scale production greatly — probably far more so than he had anticipated.
Two years later, more than 36,000 backers still hadn’t received their coolers — and there wasn’t enough money left to continue production. Grepper resorted to selling the Coolest Cooler on Amazon and asking backers to send an additional $97 for “expedited delivery” if they wanted to receive their coolers within a reasonable length of time.
What happened? Perhaps the Coolest Cooler became too successful, too quickly. Is your company experiencing a phase of unexpected and rapid growth? Don’t become a victim of your own success! Read on for four tips that can help your business survive its big break.
Private Label Services
One of the problems with rapid growth is that your business’s expenses can quickly outgrow your incoming capital. As sales grow, a business’s needs also grow. What if the factory producing your products can’t increase production? What if your marketing or sales team can’t keep up with incoming leads? Will you need to hire more employees for order fulfillment or customer service — and if you do, will you need a larger facility? These are all good problems to have, but they are still problems that can seriously jeopardize your cash flow. To scale your business as efficiently as possible, consider using some private label services. Using an outsourced call center to handle customer support phone calls, for example, can help you avoid taking on additional in-house customer support staff. You can also outsource marketing activities such as social media management, website content writing and outbound telephone sales.
Maintain Cash Flow
When your business grows, you’ll spend more — and maintaining positive cash flow will become more important than ever. You don’t want to put yourself in the position of becoming a bill collector when payments from customers are past due. Your business is in no position to be your market’s bank. You may have to tighten up account policies to make sure you have a steady stream of income to cover all your expenses. Resist the temptation to finance your growth with heavy debt, as this will cripple your financial performance when growth slows down.
Organic Growth
Entrepreneurs and strategists are often kept up at night by the thought of losing potential business. They know that some of these opportunities will not arise again. If scaling your business cannot be reasonably done at the rate of increased demand, you may have to simply wave good-bye to some of those opportunities and continue to fund growth out of your retained earnings. This sounds like business blasphemy, but like Icarus of Crete, you may plunge to your financial death trying to chase your own ambition. Roy Vaden discusses this and other small business leadership tips in his entreleadership article.
Diversify Suppliers and Other Partners
Your business might be healthy enough to survive a phase of unexpected growth, but the same may not be true of your suppliers and partners. For example, suppose you rely on just one factory to produce a particular product — and demand for that product suddenly explodes. Can the factory scale up to meet the increased demand, or does the factory already suffer from a lack of resources because it produces products for many other companies? In times of rapid growth, it becomes important to identify the most crucial suppliers and other partners. If your business currently couldn’t survive the loss of a crucial partner, it’s time to diversify your partnerships.
Plan Ahead
Your products or services may be in great demand now, but it isn’t safe to assume that things will always be that way. According to Bill Gates, “success is a lousy teacher.” When sales figures are strong, it’s easy to delude yourself into thinking that there will never be another lull or downturn. In reality, the best time to plan for a decline in sales is when you have the money to do something about it. Establish an emergency cash reserve from your retained earnings and create a game plan for what you’ll do when business isn’t as good as it is now.
The Take Away
Congratulations on even having this problem! Clearly you are answering the call of the market in a seriously valuable way! Just make sure you’re managing this phase of your business intentionally and proactively so that you can continue to thrive and expand and make your business dreams come true! I want to see you win at business and win in leadership like you’ve never even thought possible!