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Small Business Tips

5 costly mistakes to avoid when scaling a business

Kim Kaupe
coworkers discussing in office

Starting a business, like starting a solid campfire, is tricky. From outside forces derailing your efforts to unpredictable conditions, the road to building a roaring inferno (and business!) is tough. However, making the flames larger can prove just as unpredictable and potentially hazardous.

If you pour a gallon of gasoline on a flame, not only could it quickly spin out of control, but it could burn incredibly hot and then quickly die out. Make sure your business doesn’t find itself in either one of those scenarios by watching out for these big mistakes when scaling.

Make sure you have the right insurance

Rapid business growth is no excuse to cut corners when it comes to paperwork. A fast approach to scaling means you are likely taking on extra inventory, risk and exposure as you push to new heights. Having the right insurance in place before your business starts to flourish is essential.

If you’re looking to grow with more prominent business partners, they will likely require you to carry additional insurance. Our initial relationship with the national retail chains, like Walmart and Cracker Barrel, required us to hold a laundry list of insurance policies, such as commercial and general business insurance. Thank goodness we had them in place before our product began shipping to stores. Otherwise, the deliveries wouldn’t have been accepted.

Additionally, if you are a solo founder or part of a co-founding team, it’s worth it to look into key person insurance. It’s not fun to think about, “What if one of us gets hit by a bus tomorrow?” “How would the business go on?” “What key systems would have to keep moving regardless of your absence?”

It’s never an uplifting or fun discussion, but it’s a necessary one to have!

Small-thinking marketing systems

Take it from me: What works for two founders at $100k in revenue and what works for ten employees at $1m is wildly different. eMarketing plans and processes need to scale in tandem (or better yet ahead!) of the business. Getting software, programs and people, whether in-house or externally, in place before you grow is essential to keep everything running smoothly. Dream big and think beyond just a marketing plan with your internal team.

When first scaling our business, my co-founder and I had all the systems and marketing plans stored in the worst place – our heads. We had nothing written down, and therefore if someone got sick or needed to take over, it was a huge problem.

We realized after many errors that writing down our processes was helpful, and as we expanded, we needed to hand over our “guidebook’’ to the various marketing roles we had been performing. Whatever strategy or tactic you decide to use, planning it before the rapid growth starts are paramount in keeping the train on the tracks.

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Get an HR plan

Scaling doesn’t just mean revenues and costs; it means people and policies. Your human resource management will determine the types of talent attracted to your organization. If you want the best talent, you must have the best systems in place.

Beyond just health care, insurance and a 401k, you must create a well thought-out employee handbook detailing what your company’s policy and plan are for every scenario from someone getting into an accident to maternity leave. Think of every situation possible and, when possible, ask fellow founders what their policies look like.

It’s not every day you are told to cheat off someone else’s homework, but this is one of those rare cases! If you want to copy my homework to start, we use a PEO company called TriNet that I’ve been thrilled with!

Get your finances in order

When scaling, your needs will continuously change, especially in the form of financial service providers. Whether it is a bigger line of credit, loan or advance bookkeeping, you are going to need to be ready for how your business operates at a bigger scale.

Take the time to hire an experienced CPA or bookkeeper whose references you have personally vetted. This significant step will become vital when dealing with more complex tax structures and reporting.

When I first started, I made the mistake of trying to cut corners and save money by not hiring a professional CPA or bookkeeper. My co-founder and I decided that enough YouTube videos and QuickBooks tutorials would leave us more than prepared for tax season. Our assumptions were, as I’m sure you’ve guessed, totally wrong.

Our taxes were filed incorrectly, and we got in huge trouble with the IRS. Ironically, we had to hire a CPA and ended up paying even more money than we would have in the first place for him to fix all the mistakes that we made. Save yourself the headache and recognize that bookkeeping is no place to worry about saving money.

For payroll services, consider a PEO which automates all payroll, health care enrollment and workers comp reporting. Historically we have used ADP and TriNet, both of which are valuable resources. Lastly, meet with someone at your bank to see what business loan options or credit line resources might be available to you. While you might not need them right now, it’s valuable information to keep in mind as you scale.

Get a support system

When growing a company, you will need mentors, resources and fellow founders to lean on. Rates of depression in founders are more likely 50% higher compared to non-founders. Be aware of these stats and make sure if you begin to feel isolated, anxious or depressed that there are resources in a procedure for you to utilize.

When I first started my company, I felt like I was letting friends and family down—all while venturing into the great unknown of entrepreneurship. The things I had been able to do previously, like attending birthdays, family vacations and brunches with my girlfriends, had to be put on hold as I poured every waking hour into my business. It alienated those closest to me, and in the end, I felt more alone and isolated than ever before.

To help combat this feeling in the early days of starting a business, I discovered founder groups incredibly helpful. The two I am involved with, Young Entrepreneurs Council (YEC) and Dreamers+Doers, have both online and offline components to them, which I find incredibly helpful.

I have used these communities to help me through the lowest lows and the highest highs of my business. Remember that whether scaling or not, you are never alone, and there is an entire network of resources online and offline to help you in your entrepreneurial journey!

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