“Within a couple of weeks after
Chobani got into ShopRite, we started getting orders for 5,000 cases. The first
time we received one, I kept double-checking to make sure it didn’t say 500. It
quickly became clear that our biggest challenge wasn’t going to be selling
enough yogurt—it was going to be making enough yogurt.”
– Hamdi Ulukaya, founder and CEO
of Chobani
Start-ups die for a lot of
reasons; the wrong players, no market for the product, lack of a viable
business plan, overspending, getting crushed by competitors. The list goes on
and on.
But when a business owner
experiences their first taste of success, it’s easy to think that the product
has been perfected and the time for growth is upon them.
While scaling a business is a
great problem to have, it can be the single most dangerous period of a
start-up’s lifetime. In fact, scaling is the number one reason that startups
fail.
A study from the Startup Genome
Report uncovered that 74 percent of startups collapse because of “premature
scaling.” Each one of these baby businesses that thought wise to size up their
britches also failed to hit the 100,000-user mark.
As unfortunate as it is, this
mistake has been seen time and time again. Recently, some great examples of
companies that scaled quickly were compiled in an infographic by Alligatortek;
some made it through the growing pains while others absolutely exploded.
Companies that Couldn’t Make the Leap
Pets.com is a prime example of a
brand that failed to appropriately scale.
The organization launched more
warehouses than necessary and continually sold products at a loss. There’s even
more woeful elements to this downfall; the company opted to spend $11.8 million
on advertising in 1999, but at the time it only had $619,000 in revenue.
Less than a year later, Pets.com
folded.
Groupon, despite becoming
something of a household name, is another case of premature scaling.
As the company continued to scale,
profits did not support the company’s expansion. Despite this, Groupon
continued to accept money from investors.
Unlike Pets.com, Groupon is still
in business. However, since going public, the company’s stock has plummeted
from $20 per share to just $3.26 per share as of the writing of this article.
Despite these depressing examples
of business management, there are also standout cases of start-ups who scaled
with style and grace.
Companies with Suitable Scaling Plans
While there are many cases of
companies scaling at the correct time and through proper methodologies, few
managed to accomplish this feat as skillfully as Chobani.
Chobani got its start when the
company’s to-be CEO, Hamdi Ulukaya, opted to buy a rundown Kraft yogurt factory
that the corporation was selling for $1 million. After five months of red tape,
Ulukaya acquire the factory and hired four employees from the former Kraft
operation as well as a “yogurt master” from his homeland of Turkey.
Ulukaya was the sole investor in
Chobani and had no prior business training.
The crew spent several years
perfecting the brand’s recipe and packaging (which was unique to the American
yogurt market) and by 2007, Ulukaya was ready to officially launch his brand.
As Ulukaya describes in his own
words:
“. . . After Chobani hit the
market, I financed our growth through further bank loans and reinvested
profits. This is a crucial piece of the Chobani story. Our ability to grow
without reliance on external investors—the venture capitalists, private equity
types, strategic partners, and potential acquirers who’ve offered us money
since we launched—was vital to our success.”
In addition to Ulukaya financing
Chobani on his own, he also credits several other decisions for Chobani’s
success in that period.
The first was ensuring that his
yogurt would be carried by mainstream grocers instead of niche shops. Despite
expert opinions, Ulukaya also insisted that the yogurt be stocked in the dairy
isle instead of the gourmet foods section.
The second was negotiating with
retailers to pay off store slotting fees, which run about $10,000 per SKU, as
the product sold.
Additionally, Ulukaya was
extremely careful about finances. Knowing full well that many start-ups hire
people to cover anticipated growth, he opted to wait until that growth had
actually occurred so as to not succumb to the same pitfall.
Outside of these factors, Chobani
was able to grow effectively and efficiently due to lack of competitors in the
space and high demand for the product.
All of these elements and
decisions ultimately allowed Chobani to scale in line with its projected growth
and achieve massive success.
In a mere five years after its
initial launch, Chobani had grown to more than $1 billion in revenue.
Hamdi Ulukaya’s scaling of Chobani
provides other business owners with the ideal mindset for rapid growth.
Tips for Scaling Rapidly
Should you end up facing the
fortunate dilemma of needing to scale your start-up rapidly, there are a few
things you should keep in mind.
The first is to always keep teams
to a minimum. This will help to keep your organization nimble. The more team
members you have, the more time you will spend co-ordinating people as opposed
to driving goals forward.
The second thing to be mindful of
is your mindset. Don’t get so caught up in growth that you forget to focus on
the product; this is something Ulukaya always kept top of mind.
Additionally, as a company’s
leader, you have to know when to intentionally slow down growth so that things
don’t spiral out of control. Growth for the sake of growth is not a stable or
sustainable practice.
Finally, always remember to
subtract as you add. While scaling is all about adding more, in that process of
expansion your company will outgrow various processes, technologies, and other
internal variables.
Often times, rapid surges can
cover up aspects that are no longer working properly; this can lead to long-term
problems. As your company continues to reach new levels, audit your internal
operations regularly, and establish aspects that need to be left behind.
Scaling can be an extremely
stressful time for any organization. Be sure to follow Chobani’s example and
incorporate these tips into your expansion blueprint so that you can survive
well past your first growth spurt.
What other brands scaled as
successfully as Chobani? Is your business getting ready for a period of growth?
Source: - http://www.sitepronews.com/2017/06/07/finding-the-right-pace-to-grow-your-business/
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