70% of the fastest-growing startups, end up failing!

Most entrepreneurs focus on scaling their startups as quickly as possible, instead too much / fast growth often leads to failure just as quickly as a lack of growth.

According to a joint study by the Kauffman Foundation and Inc., nearly 70% of the fastest-growing startups, end up failing. Research by the California State University showed that companies, which had fastest revenue growth eventually wither failed or performed worse in the long-term, as compared to their sustainable-growing counterparts.

Accelerated growth (your business outpacing your capacity to serve i.e. current infrastructure) can be just as dangerous as no growth at all.

Here's an case study of How Unsustainable Growth Plunged AskMe!

Perils of fast or excessive growth include:

• Cash flow mistakes (losing track of finances), whether it’s overly-optimistic growth projections or inability to differentiate between profit and actual cash on hand. This often is a big reason why many startups fail and slip up here means mean big trouble for your business.

• Ineffective Business Operations (disorganized team, structure, processes, etc)

• Hiring the Wrong People (who don't fit the culture, skills sets or performance standards)

• Inefficient or Slipping Customer Service (lack of focus on Customer Experience, a key competitive differentiation of Startups)

• Management Mistakes (micro managing, missing the big picture, lack of business focus)

• Scaling Technology to Business Need (Incompetent, ineffective technology to support business growth)

Oyo, once one of India’s fastest-growing tech start-ups, is now rapidly scaling back. Oyo has pulled out of 200 small Indian cities, cutting back 65,000 rooms (1/4th of the total), layed off 2,000 employees worldwide and slashed other costs as it faced immense pressure from its biggest investor, SoftBank, to curb vast operating losses.

This article suggests 3 ways to grow to avoid the perils of failure:

1. Take 2 steps forward and 1 step back.

• Take two steps forward, getting out of your comfort zone, and this would put you in a vulnerable position. However learn from this experience, and immediately take a step back to re-arm yourself to build a better foundation for future growth.

• Growth businesses are not always moving forward. In the long run, they may show an upward trajectory, but along the way they are reshaping their business and even shrinking before they grow. Each time they do this, the company grows stronger.

2. Go slower, not faster.

• Success comes from trial and error, hence growing slower will create opportunities to improve your business model.

• In this way, your cash flow balance remains intact, thereby giving you ample time to take up new opportunities.

3. They start over often.

• The most successful growth companies are constantly changing their business (bring in ample funds, build new teams or get rid of dead woods, etc.) to rebuild the company with the best people and assets.

• They ask, "How would we build the business if we were starting from scratch?"

Successful growth companies are built through a series of ups and downs, which ultimately results in a better value proposition and business model.

Want a fool-proof sustainable growth plan for your venture, click here.