Rapid Growth Can Create Big Problems for Small Firms

Most big businesses had a very small start. Kraft Foods began with James Lewis Kraft using a horse and wagon to sell wholesale cheese to local merchants in Chicago.

Hewlett-Packard launched after Bill Hewlett and Dave Packard hunkered down in a rented Palo Alto garage.

Ben & Jerry's was born after Ben Cohen and Jerry Greenfield turned a rundown Burlington, Vt., gas station into an ice cream shop.

Those entrepreneurs, like countless others, were able to grow a fledgling firm into a strong, viable company. Successfully taking a company beyond the start-up stage and growing it into a stable small, medium or large-size firm is admirable -- as well as incredibly difficult.

Stretching too far, too fast is a common misstep among enthusiastic business owners eager for growth. The ramifications of too-rapid expansion can be great: It can bring on massive stress for the company management and employees, as well as potentially compromise customer service and product quality.

Many first-time entrepreneurs get so passionate about potential growth that they "don't push the pause button enough," says Thom Ruhe, vice president for entrepreneurship at the Ewing Marion Kauffman Foundation, which supports entrepreneurial endeavors.

Without proper planning, company leaders who aggressively enter new markets, create line expansions or hire new employees can end up with not enough time or money to meet all their commitments.

"Going too fast can kill you from a cash-flow standpoint," says Ruhe. Come payday, an entrepreneur doesn't want to have to say to employees, "As soon as receivables get caught up, we'll get you a paycheck," he says.

Daniel Lubetzky, founder and CEO of KIND Healthy Snacks, says he "made a lot of mistakes" during his earlier entrepreneurial years, such as putting too much emphasis on expansion and taking on big orders that were difficult to fulfill.

"I wanted to grow very fast," says Lubetzky, who...

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