Hard Lessons Learned Fast: When Growing Your Business Too Fast Takes a Wrong Turn

Business owners are oftentimes also big dreamers and with those big dreams comes visions of growth–more and more products and services offered to more people, and more team members to serve those customers.

New business owners seek fast growth to penetrate markets that they know their competition will try aggressively to create barriers. If they are successful with gaining funding from investors they will try to convert that capital into two portals that help drive growth: product development and talent acquisition. Rather than a strategy to work small with long-term growth (the traditional model), the trend has been rapid expansion of talent pool (workers) and rapid growth (of product line and access for customers) in the short-term. The thinking behind this is that somehow either this strategy will slingshot the company into a position that can sustain the long-term climb (and the ups and downs that may come), or that the company will become so profitable that they can one day be acquired (which would result in high gains for all parties).

There’s a glitch in that big growth strategy–it rarely takes into consideration the what-ifs and worst case scenarios that seasoned business professionals factor in to their business plans (and all revisions after the first). We see this error in judgment in a lot of startups especially in tech, food service, and retail industries. There’s a strong desire to get their product in the hands of the masses and so the natural inclination is to hire hire hire as many people as possible to ensure that supply meets demand.

But what happens when demand wanes? What happens when you get blind-sided by legal or financial issues? What happens when the systems that you need to run your company crash or are hacked? What happens when your company is no longer as profitable as it used to be? What happens when you’re no longer hitting your revenue targets?

That is what happened to NerdWallet and why their CEO, Tim Chen just announced that the company is making the tough decision to lay off 53 more employees after laying off 40 people in April and another 6 in July.

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Although the 8-year-old company has raised $69 million in funding (with their most recent round in 2015), and in 2016 they acquired their first company, retirement planning company aboutLife, what they never considered was that their inflow would not outpace their outflow. It appears that they have been spending more than they are making and reinvesting back into the company, and as Chen wrote in his email to employees, the two biggest drivers of NerdWallet is profitability and operational efficiency–and they have been struggling in both areas.

NerdWallet will have to streamline operations, cut back on excess spending, and find a way to scale their work without exhausting their resources and reserves. Maybe that is why they just hired CFO Laura Onopchenko in September. Onopchenko has more than 20 years of experience leading high-performing teams, and she has “built the multifunctional capabilities required to enable continued growth and partnered with leaders to develop and implement strategic, financial and operating plans,” their September 29th company press release stated. Hopefully NerdWallet’s senior leaders will do their best to help those almost-100 employees secure jobs elsewhere.

It’s important that all companies regardless of size or industry invest the time in auditing all of their practices, functions, and processes in every position, department, division, and level of their company. Does your outflow pace well with your inflow? Are outputs and inputs tracking well? With proper planning and controlling you can ensure better outcomes for organizing and leading your people and resources within your company.

Before 2017 ends take the time to engage or set up your company’s auditing system (if you don’t already have one) and determine how effective and efficient your people and processes are compared to the standards you have in place. That way you can start 2018 with a focus on where you want to be and you won’t be trying to play catch-up in Q3 or worse Q4 of next year.

Sources:

NerdWallet lays off 11 percent of staff due to missing profitability goals

https://www.nerdwallet.com/blog/corporate-news/laura-onopchenko-our-first-cfo-joins-nerdwallet/

https://www.prnewswire.com/news-releases/nerdwallet-announces-acquisition-of-aboutlife-300291410.html

 

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