How to beat the most consistent predictor of startup failure

If you’re reading this, I can quickly surmise a couple of things about you: You’re a small business owner or an entrepreneur, and you’re probably going to fail — miserably. Sorry for the harsh dose of reality, but the statistics don’t lie. I’m sure you truly believe you’re different, and somehow you have found themagic recipe that will help you defy the enormous odds stacked against you. I’ll go ahead and fast forward to the end so we can skip the sad part: you’re not, and you haven’t.

The good news is, once you accept the reality of your impending failure, you can get to work to prevent it.

The internet abounds with countless tips, tricks and varied anecdotal anomalies that may sound applicable to your predicament, but today is not the day for another listicle. Today, we’re going straight to the killer issue — the prion disease that will attack the protein structure of your business (nature is scary, Google it) — known as scalability. Specifically, premature scaling.

Now if you’re a prepubescent reptile, maybe this concept sounds appealing to you. Unfortunately, you’re not, which means that you should read it as: one of the most consistent predictors of startup failure.

In case you don’t know what scaling is (if you are a small business owner and you do not, then please, stop reading and proceed with nailing your doors shut), it’s essentially the point when a startup begins to experience positive growth and generates more sales. Most of the time, this translates to

seeking outside investment capital, hiring more employees or ramping up marketing initiatives.

Scaling in response to growth is good. Scaling to drive growth is BAD and, you guessed it — premature.

The scariest part about premature scaling is that it can be so illusory, because after all, hiring is good, growth is good and more funding is good… right? Perhaps, but only if you’re doing these things in the right order. Many startups crash and burn because one or more scalable aspects of their business outpaced the rest and they failed to course correct or slow down. Fortunately, if you’re smart and spot the warning signs (too much money, too many employees, too many early adopters, etc.), you can take evasive action and avoid a crash yourself.

Jon Rush, CEO and founder of C7 Device Recycle — a startup that acquires used cell phones, refurbishes them, and sells them at a discounted rate — found himself in this very situation last year. Even before his new company’s first anniversary, he was raking in $200K in sales. As the sole proprietor, he was the CEO, CFO, CMO, CBO, CTO, janitor and landlord. I’m sure all you small business owners can relate! The point is, when sales began to grow quickly, he considered making a few outside hires to take some of the burden off his shoulders. And why wouldn’t he? He could afford it, right? Wrong.

Take a page out of Jon’s playbook — slow and steady wins the race.

Jon aptly recognized that certain aspects of his business were outpacing others and this was very dangerous, so he pumped the brakes. Instead of hiring a marketing firm, he endeavored to turn his customers into his best marketers by focusing on creating an unrivaled customer experience. Instead of hiring manual labor to test, sort, pack and ship products, Jon kept his costs low by incentivizing his teenage children to help out with the business. Jon also committed to becoming a productivity machine, structuring his day to reduce time waste and weed out inefficiencies.

Lastly, Jon refocused his vision for C7 Device Recycle so he could see both the forest and the trees. He had to consciously force himself to slow down, focus on the details and strengthen the core of his business — let it mature, if you will — so that he didn’t become another sad startup statistic.

You entrepreneurs, you’re a contagiously enthusiastic bunch. That’s why I like you so much. But your overly-optimistic approach tends to yield hasty decisions rather than calculated ones. So please, follow Jon’s lead and just slow down. After all, Rome wasn’t built in a day — but it burned in one.