How fast should you grow your company? I get this question from to time by startup and early-stage companies. Assuming that there is demand for your product/service and the sales are there for the taking, here’s my response:

  1. Competitive environment. Do you have a defensible competitive advantage, like a patent? Or, another way to look at it is can your product/service be easily and quickly copied? If so, then you might need to race forward in growth to prevent competitors from copying, catching and passing you up.
  2. Market state. Are you riding a consumer trend? If so, then you might need to grow quickly to take advantage of that trend.
  3. Financial pressures. How quickly do you need to achieve profitability? Do you have funding to get you to profitability without fast growth?
  4. COGS. I have yet to meet a startup or early-stage company in consumer products who does not have a COGS problem. That is, their COGS is very high because they don’t have the economies of scale that comes with size and/or they don’t yet have the expertise (usually gained through experience or hiring the right people) to source materials. Quick growth can mean economies of scale to help lower COGS.
  5. Personal goals. Do you thrive on fast-paced, fluid and changing environments? Do you want to attempt to sell your company within a 10 year time frame? If so, then you might want to grow fast.

When is growth too fast?

In my experience, growth is too fast when:

  1. You lose budegtary control and expenses start to spin our of control and you can’t stop them.
  2. You make lots of stupid mistakes.
  3. Your marketing/sales spend is not efficiently retaining customers. That is, you might do a great job at trial or one-time buys, but not at retention, thus your marketing/sales is constantly working to replace the customers you are losing. If this is the case, then you may very well be building a house of cards in your business that will fall apart when you run out of first-time customers.