Regret of business growing too fast

By Diane King

Groupon, Xcite Logic and Zynga are just a few companies that suffered the regrets of a business growing too fast. During a United States congressional hearing, Toyota’s president, Akio Toyoda, said his company may have grown too fast. He is reported in BBC News as saying, “We pursued growth over the speed at which we were able to develop our people and our organisation and we should be sincerely mindful of that.”

A business growing too fast could cause entrepreneurs to take their eye off the ball

Results of Toyota’s speedy growth were accelerator pedal and braking system errors. Unfortunately, the errors caused accidents. They also led to deaths. Yet, not every business that grows too fast develops faulty products. Other businesses run headlong into capital or cash-flow problems.


This is what happened to Xcite Logic, a business solutions technology provider. In Australia’s CRN, a representative of the company shared that, “With hindsight, the capital of the company was insufficient.” Lack of capital found Xcite Logic saw the company owing several million dollars to creditors like Apple. About 55 people, a little more than half the company’s workforce, lost their jobs.

Jim Picariello, founder of Wise Acre Frozen Treats, started his business in a kitchen in 2006. Two years later, the company had 15 employees. It was also operating out of a 3,000 square foot facility. It’s frozen treats were shipped to and sold at East Coast supermarkets and natural food stores in the United States.

If meeting those East Coast store fulfillment requests was hard, Wise Acre Frozen Treats truly staggered when West Coast stores came a calling. At first glance, it was a beautiful thing, then the challenges of a business growing too fast set in.

Picariello shares with CBS Money Watch that, “Once business took off, I knew I needed to raise more capital to cover our operating expenses, which included labor, equipment, ingredients, packaging materials, insurance, taxes, legal fees, design and marketing, as well the lease on our building.”

He goes on to say, “Local bankers gave us $300,000, split between a regular loan and an equipment loan. We also received $200,000 from an investment firm. But because we had so many orders to fill, I knew we really needed about $1 million to keep us solvent.”

In Wise Acre Frozen Treats’ case, the company received orders faster than it raised capital to cover all its expenses. The type of capital companies raise can also haunt them. For example, it’s better to raise capital from sales than it is to raise capital from loans, adding interests to the books.


Entrepreneurs could avoid being part of a business growing too fast, if they regularly analyze their revenues, expenses and profits. It’s also important that entrepreneurs accept what numbers reveal, rather than rationalizing and using magical thinking, as if money is going to fall out of the sky simply because entrepreneurs want it to.