If there’s a single buzzword that describes what every entrepreneur and investor is chasing right now, it’s “hyper-growth.” Hypergrowth refers to the exponential expansion that certain businesses experience as they quickly go from non-entity to ubiquity in their field. Think Zoom, Uber, Facebook, and many of the other fastest-growing startups you’ve heard of. But while rapid expansion might not seem like a bad problem to have, if you aren’t prepared for it, your business’s growth could collapse just as quickly.
If your company is seeking a hyper-growth model or otherwise finds itself in a period of massive growth, it is imperative that you have a plan in place to prevent your company’s leadership and workers from getting burned out by the challenges of dealing with rapid expansion. Let’s take a closer look at what a hyper-growth company is, and what you can do to ensure that a period of hyper-growth doesn’t end in an equally steep downturn.
What Does Hypergrowth Look Like?
The term hyper-growth first appeared in the Harvard Business Review in 2008. According to the World Economic Forum, compound annual growth rates (CAGR) above 40% define hyper-growth. Hypergrowth is at least double the rate at which a company’s growth can be considered rapid (20% CAGR), which is itself very fast. To put all those numbers In perspective, most medium-sized companies would be thrilled at sustained 10% growth. Hypergrowth usually occurs after the business’s products and services first become available but before the company has fully developed.
Hypergrowth companies are the envy of the business world. Some examples of well-known hyper-growth companies include Amazon, Facebook, Uber, Stripes, and more recently, Zoom, a company whose hyper-growth was fueled by the COVID-19 pandemic.
Entrepreneurs are constantly trying to start the next big hyper-growth business, and venture capitalists are constantly trying to be the first to identify the next big hyper-growth company (and shove cash into its hands).
Although companies like Facebook, Uber, and Amazon all maintained their growth and did not experience a rapid downturn, they are the exception to the rule. The reason why so many hyper-growth businesses fail is because company leadership failed to properly plan for the many challenges inherent to rapid change and wildly increasing demand.
Challenges of A Hypergrowth Business
Companies that deliberately seek hyper-growth often lose money for years as they rapidly grow, snap up competitors, corner markets, and slash the costs of their products to appeal to consumers. It can sometimes be many years before investors in the business finally see a return on their investment.
For instance, Amazon was unprofitable nearly 20 years before it finally starting turning a profit in the middle of the last decade. Investors take a risk by putting their money in potential hyper-growth businesses, and if they do not remain committed to keeping the business afloat through frequent cash infusion, then collapse could be inevitable.
But while the concept of hyper-growth runs counter to a more traditional model of growth, successful hyper-growth businesses can eventually turn into giant corporations that deliver huge, regular profits to investors.
Unsurprisingly, businesses pursuing hyper-growth face certain unique challenges, including:
- Too much focus on growth – Although prioritizing growth is one of the hallmarks of a hyper-growth business, a company can fail if leadership gets too focused on scaling the business. By focusing too much on revenue growth, you may neglect problems in areas like IT and operations — the areas that ultimately fuel that growth. As the company grows, more money must be spent updating systems to adapt to the business’s increasing size and workforce. While you are focused on growing revenue, you should also focus on scaling other areas of your business to keep pace. Consider your internal communication with employees and utilize internal and external hyper-growth PR strategies to ensure you’re staying focused on emerging trends that may impact your reputation.
- Overworking employees – Employees at booming businesses may be expected to work long hours, but there can come a point where those workers get burned out — and even startup culture can’t prevent the exhaustion that working 80+ hour weeks can bring. When some employees put in excessive work hours, that signals to other employees that they should do the same, and it’s at that point that hyper-growth business culture can become toxic and unsustainable. Even though many employees may be eager to work exhausting hours because they believe in the company’s vision and business objectives, overwork leads to mental and physical health issues that could hurt the company more than that hard work helps it.
- Marketing expenses – The bigger your business gets, the more it will cost to market your business effectively. At some point you may need to reevaluate your marketing solutions and determine if there are any lower-cost options. By maintaining exhaustive and meticulous metrics, you’ll be able to track your profit margins appropriately.
The following tips can help you manage a hyper-growth business in a responsible way and ensure that it successfully overcomes the challenges listed above:
- Strategize – If you are too focused on growth, you may lose sight of other challenges that may obstruct your business’s path to success. Have a solid growth strategy in place, and consider working with a PR firm to develop a plan that serves your business’s best interests. Select a PR firm that has experience working with clients in your specific field, a vast network of industry influencers and experts, a team of creative content developers who understand your target audience, and access to top-level consultants who can help you safely sustain this period of hypergrowth.
- Focus on culture – A good company culture is what keeps employees committed to your vision and your company’s growth, and attracts the high-quality candidates you’ll need in order to sustain that growth. Ensure that your employees have a healthy work-life balance, and foster camaraderie and friendship among your workers. As you are developing your company’s culture, remember to provide employees with benefits and perks that they actually want and that actually improve their lives. Beer on tap and arcade games in the lobby may seem cool, but they’re a poor substitute for a company that actually cares about its employees as people and fosters a good work-life balance.
- Don’t forget about profits – Many companies can successfully burn through cash as they fuel rapid growth, but few can turn endless investor patience into a long-term business model. The end goal should always be sustained profits, not eye-popping revenue fueled by even larger losses. Build loyalty and trust with your investors by laying out a future profit plan.