There are clear advantages to growth as a digital marketing agency, as growth = success. Yet rapid growth can easily be a nail into your agency’s coffin if not appropriately addressed and managed.
Growth should be the top priority of a marketing agency, as being stagnant is akin to dying. The advantages of business growth are rather obvious: you get an increase in revenue and a track record of success stories. This gives you greater industry clout than the previous year, month, or day. However, the disadvantages of rapid business growth are subtle, but can be crippling for your agency if mismanaged or neglected.
[tweetthis]Taking on more customers is a major component to success, but consider what got you your customers in the first place[/tweetthis]
In this post, we will underline five of the primary disadvantages of rapid business expansion, and how they can negatively impact your control of your agency.
1. Deficiency in product quality
Machiavelli said, “There is nothing more difficult to plan, more doubtful of success, nor more dangerous to manage than unwarranted expansion.”
If your business is growing at a breakneck pace, your focus is often directed to your new clientele, rather than on the development and maintenance of the product or solutions your agency provides. The balance of product development/maintenance and customer service/lead generation will always shift depending on the conditions. If it falls too out of balance it can result in a slump.
Taking on more customers is a major component to success, but consider what got you your customers in the first place: smart marketing practices and a quality product. Remember that it is more valuable to have retained, repeat customers than new customers. They will only keep coming back to you for marketing services if you still have the time and resources to generate positive results for them.
Ask yourself, are we at the stage where we can handle more customers while simultaneously addressing the needs of our existing customers?
Focus on product quality and generating customer loyalty with a quality product, instead of needlessly growing your customer base.
2. Increased employee turnover
Rapid expansion can also result in higher employee turnover rates, which are incredibly damaging to your agency’s profitability. The cost of replacing a salaried employee is 40-60% of their annual salary. Your employees are just as valuable as the quality of the product you provide, as they are the ones responsible for marketing and selling your product.
During rapid expansion, it is easy to forget about the team that helped build your agency in the first place. When business expansion is planned, managed, and controlled, you will have the time to monitor, connect with, and address issues that your employees may have while they learn to cope with continued growth.
High turnover also has a compounding, negative effect on morale. When employees witness a “revolving door” of staff, they become uncertain of their own job security and will spend time on looking for new gigs instead of working on improving your agency’s success.
Growth involves change, and many people are uncomfortable with change. Employees may not be comfortable with an overly-dynamic system, which requires increased attention and adaptability to remain viable and land new accounts. If your agency growth is controlled, your sales and marketing teams will be able to hone their skills, and everyone can share in the success of the agency.
3. Avoidable financial strain
Growth is good, but fast, uncontrolled growth can be very dangerous. If you are not careful, things can get out of hand very quickly and you might find yourself in a troublesome situation that could have been avoided. A lack of attention and control during expansion can also place an undue financial strain on your agency.
Growth requires increased investment in physical resources such as office space and supplies, money spent on advertising and marketing, and hiring new talented staff. Before you plan to expand the scope of your business, factor in whether you have the financial resources to facilitate such. It may very well be smarter to focus on your existing customer base than spending your financial resources on growing at a quicker rate than you realistically can control.
This is where a talented accountant comes into play, or you can also use software such as Freshbooks, to help you manage and track your financials.
When you first started your agency, you likely had a decent awareness and understanding of your financials. As you continue to grow your agency, your responsibilities will increase, and without hiring a savvy accountant you will not know how or when you can afford to invest in growth.
It’s wise to learn from past mistakes that previous companies have made when over-expanding without adequate resources. Take, for example, the history of the Boston Market franchise. By 1998 they had grown from 20 to over 1000 stores, but because they did not have enough financial resources, and a lack of operational planning, they were forced to file for Chapter 11 that same year. Two years later, they were absorbed by McDonald’s.
Sometimes less is more. Unless you are experiencing a proven, steady rise in profitability, think first before expanding the scale of your agency.
4. Finessing reputation with customers
During a growth period, you take on more and more customers. An advantage to rapid growth is that you can leverage with your customers your track record of communication, planning, results, and loyalty. However, the drawback here is that you now need to focus on delivering the same results you have demonstrated in your track record.
If you advertise, for example, that you have done X lead generation campaigns for X previous clients, and increased their lead-to-customer conversion rates, you need to have the resources to perform the same, if not better, results for new customers. Failed promises and results will negatively impact your growth fast. Bad news travels exponentially faster than good news.
5. Hiring too many people
When growing your company it is wiser to exploit the skill-sets and experience of your pre-existing employees rather than whimsically hiring new staff that needs to be trained and require greater supervision than seasoned staff.
According to former Kars 4 Kids executive Shmuli Rosenberg, a common disadvantage to sustaining controlled growth is hiring too many people, rather than hiring a few of the right people. As your agency continues to grow, obviously you will need to expand your team. However, care should be taken when considering why a new team member is the right person for your team.
The more people you hire, the more people you need to invest time in interviewing, vetting, onboarding and managing. Sometimes it’s better to use the team you have in place. They have greater experience and might be able to take on increased responsibilities within reason.
They have already been onboarded and are familiar with your company culture. They also know the right approach to communicating with your customers.
[tweetthis]It’s wise to learn from past mistakes that previous companies have made when over-expanding without adequate resources.[/tweetthis]
It’s important to be aware of the disadvantages of growing too quickly, to prepare in advance and to stay in control by avoiding common pitfalls. Growth is exciting, just make sure you do it correctly.
If you’d like to learn more about best practices for growing your agency we invite you to download our FREE “how to stay in control while growing your digital marketing agency” report.
