Operational Mistakes That Keep Small Businesses From Scaling (and How to Avoid Them)

If you could create your own fantasy board of directors, who would be on it? CO— connects you with thought leaders from across the business spectrum and asks them to help solve your biggest business challenges. In this edition, we ask an e-commerce and retail fulfillment expert to share common operational mistakes that hold businesses back.

In this edition of “Ask the Board,” we feature Jeff Kaiden, Founder and CEO of Capacity, a third-party logistics provider that helps fast-growing consumer brands, particularly those in the beauty, skin care, fragrance, and health and wellness industries, scale their operations.

Over the course of his career, Kaiden has seen a lot of companies grow very quickly. He’s also seen what happens when the operation behind the business isn’t ready for that growth. The problem usually isn’t that the company can’t find customers. In many cases, it’s the opposite.

The brands, Kaiden said, have done a great job selling, marketing, and building demand, but, unfortunately,  the systems and processes behind the scenes haven’t kept up. As Kaiden phrased it, growth doesn’t usually create operational problems; it exposes the issues that were already there.

Here are the operational mistakes Kaiden sees most often.

Putting operations on the back burner

Entrepreneurs naturally spend a lot of time thinking about sales, customers, and growth. They should. None of the rest matters if you don’t have a business.

The mistake is assuming that the operational side will somehow take care of itself. It won’t. Every time you add a customer, launch another product, or enter another sales channel, the business gets more complicated. What worked when you had 50 orders may not work when you have 500. What worked with five employees may completely fall apart when you have 25.

You have to build the operation alongside the business. If you wait until things start breaking, you’re already behind.

Rushing into automation 

Technology is great, but companies sometimes think software will fix a bad process. Usually, it lets you run the bad process faster.

Before you automate something, make sure you understand how it should actually work. Who owns it? What happens first? What happens next? Where does it get approved? What happens when something goes wrong? Then automate it.

Remember, a simple process that everybody understands is usually better than a complicated system nobody really knows how to use. The ultimate goal is to help people do their jobs better.

Delaying technology investments

This is another thing companies tend to put off. The current system works. The spreadsheet works. The person who knows everything is still there. So why spend the money?

Because eventually the business grows past it. And unfortunately, the worst time to replace a system is when the old one is already failing and everybody is running around trying to keep the business together.

Whether it’s inventory, finance, customer management, reporting, or communication, you want to make those decisions before they become emergencies. You don’t have to buy every shiny new piece of technology. In fact, you probably shouldn’t. But if you know something will become a constraint in a year, don’t wait 11 months to start thinking about it.

Creating a founder bottleneck

Founders usually get companies started because they’re willing to do everything. That’s useful in the beginning.

However, if every important decision has to come through you at all times, you’ve created a bottleneck. Your team is waiting for an answer, customers are waiting, vendors are waiting, and eventually the company can only move as fast as you can respond.

That doesn’t scale. You have to give people real responsibility, not just tasks. That means being clear about what they can decide on their own, what needs approval, and what actually needs to come back to you.

You’re not giving up control. You’re creating a company that can operate without everybody waiting for you to get on the phone.

Choosing partners who never push back

There are plenty of vendors who will do exactly what you tell them. That isn’t always what you need.

A good partner should understand enough about your business to say, “I don’t think that’s going to work,” or “There’s probably a better way to do this.”

That doesn’t mean they know your business better than you do. They shouldn’t pretend to. You know your business. They should know theirs. The best relationships happen when both sides bring that expertise to the table and solve the problem together.

You find out who your real partners are when there’s a problem, not when everything is going well.

Ignoring the impact of operations on your brand

Customers don’t really care which department caused a mistake. If the shipment is late, your brand was late. If an order is wrong, your brand got the order wrong.

If nobody responds to an email for three days, that’s the experience the customer associates with your company. Internally, you can say fulfillment made a mistake or customer service missed something or the system went down.

The customer doesn’t separate any of that. That’s why protecting the customer experience becomes harder and more important as you grow. You can spend years building trust with a customer and lose a surprising amount of it with a few bad operational experiences.

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

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