“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?
Conscious online marketer, web executive, and multi-faceted writer Tina Courtney has been creating and fostering online innovations since 1996. Tina has assisted many clients in maximizing online production and marketing efforts, and is a staff writer for SiteProNews, one of the Web’s foremost webmaster and tech news blogs. She’s produced and marketed innovative content for major players like Disney and JDate, as well as boutique startups galore, with fortes including social media, SEO, influencer marketing, community management, lead generation, and project management. Tina is also a certified Reiki practitioner, herbalist, and accomplished life coach. Learn more on LinkedIn, Facebook and Google+.