Crain’s Chicago recently reported that Bow Truss coffee houses, a hip café, temporarily closed its doors. Among the public feuds between the founder on one side and the employees on the other, Bow Truss is a cautionary tale on growing too quickly. By all accounts, Bow Truss opened 10 locations with alarming speed, boasting about its aggressiveness. Frequently involved in litigation, controversy and even a domestic violence arrest, the owner of Bow Truss has received an enormous amount of press in comparison to the size of his business. Bow Truss has begun to reopen the “profitable” locations and time will tell whether it can get its head above water. The simple fact is that growing too fast can kill you just like growing too slowly.
Here are 5 signs that you have expanded too quickly.
- Expenses more than revenues. The number one problem with expanding too quickly is that your expenses get and remain higher than your revenues. There are lots of reasons why your expenses could be more than your revenues. Your operations could be inefficient. Raw materials could be more expensive to buy until you scale. Your labor costs may exceed your pricing. Your model could also be unprofitable. Losing a bit on each sale cannot be made up in volume. Increasing revenues in this situation will hasten your business’ demise. That’s why it’s critical to model out the revenues, expenses and expansion costs for your business and then stay on top of the actual numbers.
- Cranky Employees. Engaged employees incentivized with achievable goals make a profitable business. When a cohort of your employees become disinterested or sloppy, you know you either have overworked and under managed them or you have temporarily lost the ability to hire and train well.
- Late Collections. Billing and collections take diligence. Not only do you need the right processes in place, but in small companies, the boss sometimes needs to communicate with customers to get the bill paid in a reasonable amount of time. Several levers need to fall to keep the bills going out on time and the collection calls getting made and escalated as needed. If your staff and you are overworked, those levers may fail.
- Customer Complaints. In the beginning, when you focus on quality, your customers were probably happy with you and your service. Later, when you and your staff are stretched thin, your customers may experience delays and out and out incompetence. Monitor customer feedback as a gauge on the ability of your business to keep up with its own success.
- Missed Shipments. As things start to crumble – you don’t have enough cash to fund operations, your employees start to quit or suck and your customers become unhappy – you may miss deadlines. Customers who expect quality deliverables on time become disappointed – then they disappear. At the core, your company took on too much work without the people, systems, tools and cash to deliver.
Bow Truss looks like a prime example of a good company that overreached before it was ready. Now, embroiled in controversy, bills and disputes with employees, it’s anyone’s guess whether it can survive as a going concern. But, you and I can learn the lessons: expand, with care.