USA Today
Nick LaCava and his two business partners got sweet news this spring: O, the Oprah Magazine planned to tout their candy bars in the June issue.
The ensuing write-up was a mere 30 words. But its description of Chocomize's "luscious chocolate" whetted the appetites of thousands of people across the country. The small, New Jersey-based confectioner was hit with a dramatic rise in orders and an influx of calls and e-mails. Before the article, "we were probably getting around 15 e-mails and 15 phone calls a day," LaCava says. "After the magazine came out, we would get anywhere from 50 to 100 e-mails and phone calls a day, which made things really stressful."
The founders of Chocomize had anticipated a sales uptick, but they weren't prepared for the fivefold increase in orders. Then one of their chocolate-making machines gave out.
"It was like, 'Oh my God, we're not really sure about what we're going to do,' " LaCava says.
With some fast driving (one partner found a new machine and drove two hours each way to fetch it), and some quick thinking (they brought on college interns to answer calls and e-mails), they managed to survive the weeks of tumult that followed.
"We really had to really figure stuff out in terms of efficiency," says LaCava. "When things were pretty chaotic, we thought, 'We've got to try new things.' "
Rapid expansion can cause big problems for small firms. A huge rise in product demand — or overly ambitious internal plans to forge new sales markets, open satellite offices or hire more people — can easily topple a company. As many owners have learned, stretching too far too fast can lead to unhappy employees, strained client relationships and shoddy products.
"Fast growth is a double-edged sword," says Deam Roys, founder of Los Angeles-based Roys & Associates, which specializes in executive recruiting for mushrooming companies. "It's good because things are working. But if you grow too fast, things can really blow up."
Expansion plans sink
In the case of Jim Picariello's frozen treats venture, fast growth caused a business meltdown.
What was just an idea in 2006 — all-natural ice pops sweetened with honey — soon become an in-demand product. At first, Picariello would make the pops himself, producing 300 every two 11-hour days. But by 2008, his Wise Acre Frozen Treats firm had 15 employees and a 3,000-square-foot manufacturing facility in Blue Hill, Maine.
Picariello needed more equipment to meet increasing orders, so he sought outside investors. After a handshake deal for $1 million, he assumed that fresh capital would soon come in, so spent funds budgeted for other things on new equipment.
Soon after, the stock market tanked, and the investor pulled out. Picariello spent the rest of 2008 scrambling to find other capital, but it was too late.
"I had to lay everyone off, including myself — and by January and February of '09, I knew it was done," he says. "I personally had to go bankrupt … and the bank came and took all the equipment and took all the formulas and trademarks.
"It was like living in a nightmare," he says.
Growing pains can range in severity, and they can happen in all stages of company development.
Even megacompanies can fall prey to the troubles that come with too-quick expansion. Toyota Motor's unchecked growth caused its leaders angst, and put lives at risk. The carmaker's rapid U.S. expansion resulted in safety issues and recalls, CEO Akio Toyoda said in February to the House Committee on Oversight and Government Reform.
"Quite frankly, I fear the pace at which we have grown may have been too quick," he said.
Toyota had traditionally focused on safety, quality and volume, in that order, said Toyoda, who is a grandson of the car company's founder. Yet, "these priorities became confused, and we were not able to stop, think and make improvements as much as we were able to before," he said. "We pursued growth over the speed at which we were able to develop our people and our organization."
Toyota executives — like many at flourishing companies — lost sight of the mission that paved the way for initial success.
Executives who become too focused on swelling revenue and increasing market share sometimes overlook what made the product or service special, says Mark Lange, executive director of Edward Lowe Foundation, a Cassopolis, Mich.-based non-profit that seeks to accelerate entrepreneurship.
Once those managers get overly fixated on a particular goal, "they often lose track of other important things," he says.
Anticipating results
That's where discipline comes in.
Companies need to strive for "sustainable growth" says recruiter Roys, who's helped more than 300 businesses prepare for expansion. "It's very good to grow, but you can't bite off more than you can chew, because that could bury your company."
Yet, it's hard not to take that mouthful.
Sometimes it takes strong internal reserve to hold back on an urge to sign a massive product distribution deal. Other times, the advice of a CFO, board member or business partner can help to pull in the reins.
"Seeing that brass ring could be a very seductive thing, but you need to decide what's best for you," says Bo Fishback, vice president of entrepreneurship at the Ewing Marion Kauffman Foundation, Kansas City, Mo. The foundation focuses on entrepreneurship activities. "The ability to say 'No' to an amazing opportunity is something that very successful entrepreneurs have in common."
n some cases, the knowledge just has to come from learning from past mistakes.
The founders of Guidant Financial Group found out the hard way that it's better to expand their employee roster slowly and carefully.
"From '03 to '08, we grew from two founders, a laptop and less than $10,000 to an Inc. 500 company doing $12.5 million and employing 110," says David Nilssen, co-founder of the Bellevue, Wash.-based company that provides financing, IRA and 401(k) assistance for businesses.
But when the markets began to crumble in late 2008, sales fell. "As the markets declined, so did our business — and we found ourselves top heavy," he says. The result: two rounds of layoffs and about 70 employees losing their jobs
The firm is hiring again, but at a cautious pace. Nilssen says that company leaders realized the importance of becoming a lean, efficient firm so now they can get more work done with fewer employees.
"We certainly learned some tremendous lessons
The ensuing write-up was a mere 30 words. But its description of Chocomize's "luscious chocolate" whetted the appetites of thousands of people across the country. The small, New Jersey-based confectioner was hit with a dramatic rise in orders and an influx of calls and e-mails. Before the article, "we were probably getting around 15 e-mails and 15 phone calls a day," LaCava says. "After the magazine came out, we would get anywhere from 50 to 100 e-mails and phone calls a day, which made things really stressful."
The founders of Chocomize had anticipated a sales uptick, but they weren't prepared for the fivefold increase in orders. Then one of their chocolate-making machines gave out.
"It was like, 'Oh my God, we're not really sure about what we're going to do,' " LaCava says.
With some fast driving (one partner found a new machine and drove two hours each way to fetch it), and some quick thinking (they brought on college interns to answer calls and e-mails), they managed to survive the weeks of tumult that followed.
"We really had to really figure stuff out in terms of efficiency," says LaCava. "When things were pretty chaotic, we thought, 'We've got to try new things.' "
Rapid expansion can cause big problems for small firms. A huge rise in product demand — or overly ambitious internal plans to forge new sales markets, open satellite offices or hire more people — can easily topple a company. As many owners have learned, stretching too far too fast can lead to unhappy employees, strained client relationships and shoddy products.
"Fast growth is a double-edged sword," says Deam Roys, founder of Los Angeles-based Roys & Associates, which specializes in executive recruiting for mushrooming companies. "It's good because things are working. But if you grow too fast, things can really blow up."
Expansion plans sink
In the case of Jim Picariello's frozen treats venture, fast growth caused a business meltdown.
What was just an idea in 2006 — all-natural ice pops sweetened with honey — soon become an in-demand product. At first, Picariello would make the pops himself, producing 300 every two 11-hour days. But by 2008, his Wise Acre Frozen Treats firm had 15 employees and a 3,000-square-foot manufacturing facility in Blue Hill, Maine.
Picariello needed more equipment to meet increasing orders, so he sought outside investors. After a handshake deal for $1 million, he assumed that fresh capital would soon come in, so spent funds budgeted for other things on new equipment.
Soon after, the stock market tanked, and the investor pulled out. Picariello spent the rest of 2008 scrambling to find other capital, but it was too late.
"I had to lay everyone off, including myself — and by January and February of '09, I knew it was done," he says. "I personally had to go bankrupt … and the bank came and took all the equipment and took all the formulas and trademarks.
"It was like living in a nightmare," he says.
Growing pains can range in severity, and they can happen in all stages of company development.
Even megacompanies can fall prey to the troubles that come with too-quick expansion. Toyota Motor's unchecked growth caused its leaders angst, and put lives at risk. The carmaker's rapid U.S. expansion resulted in safety issues and recalls, CEO Akio Toyoda said in February to the House Committee on Oversight and Government Reform.
"Quite frankly, I fear the pace at which we have grown may have been too quick," he said.
Toyota had traditionally focused on safety, quality and volume, in that order, said Toyoda, who is a grandson of the car company's founder. Yet, "these priorities became confused, and we were not able to stop, think and make improvements as much as we were able to before," he said. "We pursued growth over the speed at which we were able to develop our people and our organization."
Toyota executives — like many at flourishing companies — lost sight of the mission that paved the way for initial success.
Executives who become too focused on swelling revenue and increasing market share sometimes overlook what made the product or service special, says Mark Lange, executive director of Edward Lowe Foundation, a Cassopolis, Mich.-based non-profit that seeks to accelerate entrepreneurship.
Once those managers get overly fixated on a particular goal, "they often lose track of other important things," he says.
Anticipating results
That's where discipline comes in.
Companies need to strive for "sustainable growth" says recruiter Roys, who's helped more than 300 businesses prepare for expansion. "It's very good to grow, but you can't bite off more than you can chew, because that could bury your company."
Yet, it's hard not to take that mouthful.
Sometimes it takes strong internal reserve to hold back on an urge to sign a massive product distribution deal. Other times, the advice of a CFO, board member or business partner can help to pull in the reins.
"Seeing that brass ring could be a very seductive thing, but you need to decide what's best for you," says Bo Fishback, vice president of entrepreneurship at the Ewing Marion Kauffman Foundation, Kansas City, Mo. The foundation focuses on entrepreneurship activities. "The ability to say 'No' to an amazing opportunity is something that very successful entrepreneurs have in common."
n some cases, the knowledge just has to come from learning from past mistakes.
The founders of Guidant Financial Group found out the hard way that it's better to expand their employee roster slowly and carefully.
"From '03 to '08, we grew from two founders, a laptop and less than $10,000 to an Inc. 500 company doing $12.5 million and employing 110," says David Nilssen, co-founder of the Bellevue, Wash.-based company that provides financing, IRA and 401(k) assistance for businesses.
But when the markets began to crumble in late 2008, sales fell. "As the markets declined, so did our business — and we found ourselves top heavy," he says. The result: two rounds of layoffs and about 70 employees losing their jobs
The firm is hiring again, but at a cautious pace. Nilssen says that company leaders realized the importance of becoming a lean, efficient firm so now they can get more work done with fewer employees.
"We certainly learned some tremendous lessons
