Not all growth is created equal.
Indeed, an increase in revenue, sales and profits is exciting for any organization. However, for some companies, the multiplication of their sales can create operational complications that put their business at risk of imminent failure. Typical growing pains include poor cash management, understaffed departments, poor hiring practices, a shift in focus towards customer acquisition at the cost of existing customer happiness, and more.
At my company Amerisleep, we've taken a patient and strategic approach to growth compared to many other brands within the same industry. Online and offline, nearly two hundred mattress companies have launched in recent years offering increasingly lower-priced products to undercut the competition. While they've seen that their aggressive pricing strategy drives customer acquisition, the pitfall is they perpetuate an unsustainable business practice that compromises their long-term ability to survive.
In the relentless pursuit of more revenue, many small business owners lose sight of what matters -- building an enduring brand that creates value for customers and contributes to the company's bottom line. To assess whether or not you are prepared to scale your sales, consider these three things.
1. Customer Retention
It's important to deliver value to new customers, but don't neglect how important loyal buyers can be to your long-term strategy.
Customer acquisition is both expensive and hard. On the other hand, returning customers are relatively easy to re-engage and they make large contributions to your bottom line. Research from management consultancy Bain & Company and Harvard found that companies could experience anywhere between a 25 to 95 percent increase in profits if they managed to improve customer retention rates by five percent.
When faced with the opportunity to grow your business, remember to pay equal -- if not more -- attention to existing and newly-acquired customers who may return to complete additional purchases, refer their friends and offer positive product reviews.
2. Supply Chain
With each successive revenue milestone, businesses may encounter supply-side challenges. A shortage in a key component or material could delay product delivery to new customers by a few weeks. Also, a rush to fulfill orders may lead to packaging errors, product defects and more.
Before you seek to grow, create open lines of communication with your vendors to get a better understanding of what they may need to do to scale with you. Although they may have been able to support your company throughout its infancy, they may not always be able to support your business through its next major milestones. In that instance, start conversations early with alternative suppliers who can meet and exceed your upcoming needs.
3. Company Culture
The values that you instill as core parts of your company culture will still be there even after your organization has become a much larger enterprise. That's not to say that certain aspects of your brand can't evolve over time, but nurturing a well-defined culture centered around principles that you and your team actually maintain will set you up for future success.
The authenticity of your culture will transition along with your revenue and customer base, and you'll be able to retain the values that helped you grow in the first place.