At first glance, it feels that a growing business has it made. The same goes for its owner. You have managed to survive the initial chaos of starting a business and things are looking up at the moment. You are getting more orders or accounts and your customer base is growing. You might even feel the urge to relax for a couple of days, let go of the reigns you have been holding with unyielding focus.
This is actually one of the worst things you can do. This first growing phase through which SMEs go through if everything works out can be extremely perilous and it needs to be navigated with utmost care.
So, what are the biggest mistakes growing SMEs make? How can you avoid these mistakes?
1. Taking on too much
One of the most common and often unnoticed mistakes that small businesses make when growing is to think there should be no limit to the amount of work they take on. An accountancy practice will take on a dozen more clients when they can handle perhaps 5 more. A local restaurant will open up two more spots across the town. You get the picture.
There are almost too many reasons why this is a bad thing, despite the fact it may seem like the logical next step in the company’s growth.
The biggest reason why this is a huge mistake is that it will make it impossible for you to provide the same level of service or quality of product that got you to the point where your company can grow. Logically, this will prevent you from growing even further and it might actually reverse the growth, as people become disappointed by how you do things.
2. Losing focus
When you analyze small businesses that have made it past the initial stage and that enter the growth phase, you will often find out that they were very focused on a certain aspect of what they have been doing. They find a niche for themselves and they make sure they are the best at what they are doing (or that their pricing model beats the competition).
Unfortunately, once they start growing, many SMEs begin to lose focus. For example, a law firm that handled corporate takeovers better than anyone else starts to do all kinds of corporate law and their superior services become diluted. An SEO company can decide to expand into PR or media buying, for example.
The problem with this is that this kind of growth often involves incorporating practices that the company has not yet mastered. In addition to this, such growth often means that the company will start competing against much bigger players, making it more difficult to survive.
There is nothing wrong about diversifying your portfolio, but you should never do it without thinking it through and preparing carefully for this next step.
3. Hiring without a plan
Usually, when we talk about structured hiring processes, we have large companies in mind, companies with entire HR teams and people whose only job it is to hire people. For better or worse, we totally ignore SMEs and their hiring needs and practices.
As it turns out, this is definitely for the worse. Namely, small companies are notorious for the various hiring mistakes that they make, most prominently during the growth period where first major hiring is made.
The most common mistake is not having a hiring plan or structure for the whole process. Instead, SMEs hire almost on a whim, taking on people who seem like a “nice fit” or something equally as elusive as that.
This results in hires that take too much time to become truly productive and who are much more likely to leave than someone who has been properly examined as a candidate and then interviewed.
Learn more about how to hire people, set up a structured hiring process and minimize the chances of making the wrong hires which can be surprisingly costly.
4. Wasting money on marketing
Most SMEs spend only tiny amounts of time and money on marketing early on. Simply put, they cannot afford anything bigger than that. Once they start growing and there is a bit money that can be channeled into marketing, many SMEs decide to use it for a bit of marketing that will, hopefully, bring even more growth in the future.
The problem with this idea (which is not a bad idea per se) is that SME owners usually know very little about marketing and they are easily swayed by various online “pundits” who know everything about SME marketing despite the fact they never did marketing professionally.
You need to be very careful not to buy into the hype and start wasting money on marketing tactics that will simply not have any significant effect on your bottom line. If you happen to come across an online article on how this or that new marketing tactic can do wonders for SMEs, make sure to read some more about it before you start spending money on it.
The best thing to do if you really want to up your marketing efforts is to talk to an agency that has experience in SME marketing and see what kind of numbers are in play.
Always look for numbers and clearly defined metrics.
5. Losing track of your money
One very noticeable side effect of the growth your business will experience is the increased amount of money you have to work with. Your revenue grows, your expenses increase and there is more to worry about.
In such a situation, it is not that unheard of to lose track of the SMEs budget and finances. This is definitely the biggest mistake you can make as the owner of a growing SME.
You need to keep tabs on all the financial ins and outs and you need to make sure that you are not making any mistakes that will harm your company.
If you are not absolutely certain you can handle this on your own, you should definitely think about talking to an accountant or someone who will be able to manage this part of your SME operation.
John is one of the directors at RE:SURE a remote monitoring CCTV and live audio company in Ireland. The company has bases in both Dublin and Belfast serving all of Ireland.