Some of the Pitfalls of Growing Your Business Too Fast

One of the things that I have learned in my years as an Internet marketing consultant is there are several important questions that need to be asked before you take a company to the next level. Spontaneous growth can be fatal, if not very painful for a company that is not prepared.

Unfortunately I learned this lesson the hard way. One of the first companies I worked with was selling a weight loss supplement and was doing a few hundred sales a month.

When they came to me, I examined their site, and made the proper adjustments. After the site was optimized for sales, we tested for conversions with some email drops, and were convinced we were ready to start buying media.

Now before I go any further, here is where I should have asked the client some very important questions.

1. How much processing power do you have with your merchant accounts?
2. How long does it take manufacturing to get you and order of your supplements?
3. Can your manufacturing handle a spike in demand should we need more product?
4. Can your fulfillment house handle an increase in orders?

The above questions are among some of the first I should have asked the client, as opposed to asking later.

The problems for this client started when their manufacturing could not keep up with the spike in demand for increased orders. When they could not fulfill the incoming orders on time the customers started canceling and doing charge backs to the credit card companies. The chargeback’s caused the merchant accounts to freeze the money creating a cash flow issue. As a result of the cash flow issue, the client was not able to pay their bills including their media costs, and all advertising came to a grinding halt.

As you can see we had a serious mess on our hands. Fortunately for this company they were able to recover, but it took them quite a long to do so, and they are still in business today. Not all companies should be so lucky, so it’s important to monitor growth and make sure you are ready to take your company to next level by ensuring the proper measures are in place.

You should know how much merchant account processing power you have. Until you establish yourself you are at the mercy of your merchant accounts. If you are just starting out with your first merchant account, the standard processing amount is 30k per month. If you think you’re going to need more, then get another and be prepared to switch accounts once you hit the limit on the other.

Talk to you manufacturing and see if they can handle an increase in orders if need be. Before you roll out your media campaign have more product on hand then you need in case there is lag time with manufacturing.

Set caps on your media spending to make sure you don’t get blown out of the water to soon. Now, I make sure we don’t spend more then a few hundred dollars a day in media so we won’t receive too many orders. If you want a spending cap get it stipulated in the insertion order. A daily cap in spending can give you the cushion you need in order to slowly bleed growth into your business model instead getting to big to fast.

Finally make sure you have the personnel on hand to deal with the all the new orders. It’s better to have one to many people in your fulfillment house then not enough.