In episode #47, Elizabeth Larkin and Gene Marks answer the question:
“Every now and then, I hear people talk about the dangers of growing a small business to fast. Is this an actual danger? If so, can you explain why it’s dangerous, and how to control it without hurting your business? Or, if it isn’t an actual danger, why do people mention this?”
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Elizabeth: Welcome back to the Small Biz Ahead Podcast. This is Elizabeth Larkin, and I’m here with Gene Marks.
Gene: Hello, Elizabeth. You were going to ask me what my favorite TV show … Not my favorite TV show, but what TV show it is I’m watching.
Elizabeth: Yeah, what are you watching right now?
Gene: This is a show for the guys. What was the name of your show that you liked?
Elizabeth: Big Little Lies.
Gene: That seemed like one for the … You said, it was more of a women-oriented show. The show that I’m just wrapping up, and I got three episodes left in the entire series is Banshee. Ever heard of Banshee before?
Elizabeth: I’ve never even heard of it.
Gene: Oh my God. It’s a Cinemax show, B-A-N-S-H-E-E. It ran for four seasons. It just ended last year, and it is rocking and rolling. It’s about a guy who’s an ex-con, who assumes the identity of a sheriff in a small Pennsylvania town.
Gene: You don’t even want to know what goes on in this small Pennsylvania town.
Elizabeth: I don’t. I really don’t.
Gene: A lot of adult themes in this show, let us just say. It is a … It’s wild. It’s great and fun.
Elizabeth: Are you watching it with your wife or on your own?
Gene: No, this is a show on my own that we’re watching. You want to know what I’m watching with my wife right now because I have two shows going on … Shameless. I don’t know if you’ve ever watched Shameless.
Elizabeth: I haven’t, but I heard it’s good.
Gene: It’s great.
Elizabeth: It’s on Showtime.
Gene: Showtime, and we’re in the third season of it right now, and it’s just great, so her and I are really into that right now.
Elizabeth: Alright, so you travel all the time.
Gene: Yeah, I do. I watch stuff all the time on my-
Elizabeth: You have to have two shows because if you’re watching something with your wife and then you go away, one of you might watch it.
Gene: We don’t do that. We watch … We’re pretty loyal about doing that, sticking to our own shows.
Elizabeth: That’s because you have a side show.
Gene: Right. She has her shows. She’ll watch like, Yes to the Dress anytime.
Gene: She’s obsessed with My 600-Pound Life. You ever seen that show as well?
Elizabeth: I’ve seen commercials for it.
Gene: I don’t know what the fascination is with that show, but she always puts that show on, or cooking shows.
Elizabeth: Oh yeah.
Gene: She loves the food channel.
Elizabeth: Alright, so that’s Banshee?
Gene: Banshee. It is really … It’s really a guy’s show, I got to tell you, but it’s a cool show.
Elizabeth: Okay, our listeners will be the judge of that.
Gene: There you go.
Elizabeth: I’ll put that in the show notes. We also want to remind people to weigh in the Apple or Android debate.
Gene: Android. Android.
Elizabeth: Apple. Leave us a review on iTunes and tell us if you run your business using an iPhone or an Android.
Elizabeth: We’ll be right back with our question.
QUESTION: Am I Growing My Business Too Quickly?
Elizabeth: Okay, Gene, this question doesn’t seem like much of a problem to me, but I’m going to ask you, and you tell me if you think this is a problem. This is another anonymous question. Again, you don’t have to tell us your name or your location. If you want to send us an anonymous question, that’s perfectly-
Gene: Oh for goodness sake! Tell us your name and location already, it’s more fun to know who you are, then we can make fun of you that way.
Elizabeth: Or you could just make up a name and location.
Gene: Yes, that’s exactly right.
Elizabeth: Be a little creative. Okay. This question is,
“Every now and then, I hear people talk about the dangers of growing a business to fast. Is this an actual danger? If so, can you explain why it’s dangerous, and how to control it without hurting your business? Or, if it isn’t an actual danger, why do people mention this?”
It is true, you do hear people talking about, “Oh, your business is growing too quickly”.
Gene: It is a danger. It’s a working-capital issue, it’s a productivity issue, it’s a stress issue.
Elizabeth: Okay, so explain that.
Gene: What it is, is that if you … For companies that have hit on something, and they have a lot of sales, keeping up with sales is a lot easier said than done. You always hear about, “Be careful what you ask for”. If you have a business that is becoming really popular and you’re in demand, it means you’re making commitments to people and promises to sell them stuff. When you make commitments and promises to sell them stuff, most people, like you and I Elizabeth, and I’m sure, you the listener, agree that you want to make sure that you keep your promise, so then you are burdened with stress to buy inventory, to make sure things get made on time, shipped on time, delivered on time, serviced on time, and all that takes money. All of that takes money. It’s not … When people buy stuff from you in general, if they’re paying for something in advance, they’re expecting you to get their product right away. If it’s a type of business where you’re billing somebody, then you don’t have their money for 30 to 60 days, but you’re incurring the costs of making and servicing, and getting the product out the door.
Elizabeth: What’s usually holding that up? Is it usually the product that holds it up?
Gene: It’s money that’s holding it up. Usually what’s happening to people is … They’ve got the product idea, they just can’t make it fast enough, they don’t have the money to make it fast enough. They don’t have the space, they don’t have the people to do it, they don’t have the resources, the don’t have the money to get it all done.
Elizabeth: That’s when they go on Shark Tank and they say …
Gene: “We need financing. We need a partner to come on board. We have this demand that’s out there”. When people grow too fast, they grow themselves out of business because they incur all these responsibilities, and then they can’t get them done. They don’t have the financing for it, and therefore, they, believe or not, they got all these orders, and they wind up going out of business because of that.
Elizabeth: As a business owner then, how do you solve for that?
Gene: You have to … First of all, there’s no silver bullet. None of us really know when we have something that takes you … but who knew it was going to be this successful? It’s very very tough to plan for that kind of a thing in advance. Just know that your eyes can’t be bigger than your stomach. If you’re going to take an order for something, you have to make sure that you’re going to be able to service that order and deliver on that order and add the capital to be able to spend for the materials, and the people, and the resources needed to get that order done. If you’re not sure of that, then your best practice is not taking the order; I know that sounds … Who wants to turn away business?
Elizabeth: You have a wait list.
Gene: You have a wait list, that’s exactly right, or you say, “It’s just something we can’t … We’re out of stock right now. We’re backlogged”. If you’re in that situation, you’re exposed, oh my God competitors can hear about that, and people taking away your business, so you have to resign yourself to the fact that, “Okay, maybe I can’t be master of the world and own the market, but you know what? For the commitments that I did make, I’m going to make sure I deliver on those so I’ve got happy customers, let them keep coming back”. I’d rather have happy customers and forfeit other customers than have a bunch of unhappy customers because I couldn’t deliver on what I promised to do.
Elizabeth: Yeah, that seems like good advice.
Elizabeth: Alright, we’ll be right back with our Word of Brilliance.
WORD OF BRILLIANCE: Food
Elizabeth: We’re back with Gene’s Word of Brilliance.
Gene: Food is my word. Have you ever eaten at a Pret A Manger?
Gene: You have, which is delicious. They’re in New York and DC.
Elizabeth: And Europe.
Elizabeth: I just walked by one in Paris, and I thought, “Oh, I could go in there because I know exactly the service and the food I’m going to have”.
Gene: It is delicious. They’re all over. It’s a UK-based company. Delicious, amazing sandwiches. You’re going to think I’m a nut here, but I’m going to London to see my in-laws over the weekend, I’m already thinking of our return flight back because there’s a Pret A Manger in Heathrow.
Elizabeth: There is? Whoa.
Gene: I’m going to go there. There’s days that I’m like, “I’m definitely going there and getting a tuna sandwich on a baguette with cucumber”, it’s so good. Anyway, Pret A Manger, we talk about food, they ran into a bit of a problem that would affect a lot of small businesses. They are trying to attract more people to work at their places because finding workers, this is in the UK, finding workers there, just like in the US, very difficult, particularly on lower-skilled jobs. They are also challenged because of Brexit over in the UK as well. Less immigrants coming in, which means less of a population, a pool of workers to choose from.
Pret A Manger said, “We’re going to offer to teenagers one-week internships. We’re going to teach you guys everything you need to know about the food-retail business, how to make sandwiches, how these stores work, we’re going to really prepare you for all that, a really great one week, and then we’re going to run them all throughout next summer. If you join our internship program, you’ll get all the free food you like”.
Gene: That’s how they’re going to pay. Not so nice to certain groups that advocate for internships. This is not just in the UK.
Elizabeth: They’re not paid.
Gene: They’re not being paid, that’s exactly right. Unpaid interns are … It’s a big issue of controversy.
Elizabeth: I feel like it’s a thing of the past, really.
Gene: You would think so. I think that issue … You think it would have been resolved, and yet here’s Pret A Manger saying, “We’re not going to pay these guys. We’ll just … They could have a sandwich, is that fair enough? With cucumbers on it”, because it’s England. That doesn’t fly anymore. I still have clients that want to bring on interns for the summer for high school kids, college kids, and they still kick around, “Should we pay them? Should we not …” Here’s the rule: Pay your interns.
Elizabeth: Yup, I agree.
Gene: It’s bad practice not to pay them. It’s discriminatory not to pay them, because these unpaid internships were found that they attract people that could afford income levels of their families who can afford to work the unpaid internships, and then people that don’t have that ability, they can’t work, and it’s discriminatory against them. You’re missing out on potentially good people as well. Just, again, the advice … take it from Pret A Manger, think food. Don’t giveaway free food. You can give away free food if you want, but you also should pay your workers.
Elizabeth: You should give your interns free food. That’s just a good … Yeah, pay them.
Gene: They can all serve free food as well, like a bag of chips. By the way, Pret A Manger changed its policy due to the public backlash of the UK. They came back and announced, “Oh sorry, our bad. We’re going to start paying you an hourly wage”.
Elizabeth: You really are shrinking your pool of interns if you’re only going to do unpaid.
Gene: Unpaid, it’s exactly right.
Elizabeth: You’re going to get …
Gene: You’re putting yourself up for some potential PR abuse. Public relations problems.
Elizabeth: It’s not worth it.
Gene: It’s not worth it. Pay them.
Elizabeth: Do you have to pay an intern …? Obviously you’d have to pay them minimum wage if your state has a minimum wage, right?
Gene: Yeah, you need to pay the minimum wage, is what it is. A lot of states have … Federal minimum wage is $7.25 an hour; a lot of states have higher minimum … You got to pay minimum wage. That’s something that you’re going to … You just have to do.
By the way, about paying an intern, or college kid, minimum wage for the opportunity for them to also get good experience and stuff to put on their resumé, it’s a good trade-off.
Elizabeth: Yeah, definitely.
Gene: You can get away with that.
Elizabeth: That’s what they tell you now in, as early as high school. “You got to get an internship. You got to get an internship”.
Elizabeth: They’re looking for internships.
Gene: They are. Kids are looking for internships, and I think employers should really be considering that stuff.
Elizabeth: Yeah. Okay, great. Alright. We’ll be back with our next episode on offering your customers tech support later this week.