Top 21 startup mistakes to avoid: #5: Scaling, diversifying or expanding too early

Top 21 startup mistakes to avoid

“When you start to see success, it can be easy to assume that growth will continue – and the best way to make the most out of it is to simply copy and paste your working formula. However, if you expand your business too rapidly it could have dire consequences. Y

ou may find that your period of growth was only temporary, and end up stuck with a bunch of new staff but no work and no funds to cover them. That is why it is important to take a slow and steady approach to expansion, and never act on a spur of good results.” ~ Mark Webster, Co-founder, Authority Hacker

Growth is exciting

The essence of life itself is to grow. In fact, we all become agitated when we start things that seem to remain stagnant – whether it is a business or ministry. The growth process itself comes with a lot of opportunities, and that explains why entrepreneurial startups do everything they can to ensure growth in their enterprises. However, as vital as the growth process is, it must be well-coordinated to ensure that the business remains stable and vibrant at the same time.

Growth must be organic and steady!

Of course, we understand this may not sound well to many businesspeople, but that is the best way to go. The sudden rise and fall of many new entrepreneurs is because of the penchant for sudden and uncoordinated growth. What people often forget is that no matter the potential of a newborn baby, he or she must still go through all the developmental stages of life.

There should not be a rush to accomplish what others took twenty years to accomplish. Truth be told, entrepreneurs who patiently go through all the stages of growth become better businesspeople in the end than those who rush the growth process.

Ideally, there should be no rush in business. It is better to focus on one business and grow it for ten years than to try and take advantage of every money-making opportunity. There is no need to have a group of companies when your main business is still struggling. It is vital not to focus on making impressions. Honestly, one does not need to have groups of businesses to succeed as an entrepreneur.

Do not expand too quickly

This is the biggest mistake committed by most entrepreneurs. It is not uncommon to see entrepreneurs start a business today and want to win awards and have several branches all over the country the next year.

In recent research done by Startup Genome, about 70% of the startups in their dataset scaled before they were ready. Many companies get impatient to grow, and in their haste ruin their company. They take on too much real estate or too many employees, or make expenditures they cannot really afford. We are not against growth, but premature scaling can be very disastrous – as has happened to most entrepreneurs.

Giving too much equity too quickly

To scale up or grow the business fast, many entrepreneurs rush to give out huge equity stake to investors – an act that many live to regret later. Every entrepreneur has been there: you need cash immediately and door after door gets shut in your face. Then someone comes along who is listening, but is a vulture.

You are so starved that the vulture looks like an angel (hence, angel investor). Believe me, they can sense your starvation and will use it to get as much equity as they can. Many startups scale, diversify or expand too early, and that is the reason why they fail. With patience and focus, one can build a solid and thriving business.

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