7 Fatal Business Mistakes Founders Make When Scaling Their Company

Happy ‘Deep Dive’ Wednesday,

I’m Eric Siu, the founder of Leveling Up and Single Grain, and I want to write to you directly today on the 7 biggest mistakes founders make when scaling.

From recruitment missteps to the perils of rapid expansion, I’ll cover the top critical errors that could make or break your business – plus my personal insights and solutions to help you navigate the complexities of growth.

If you’d like my team to work with you directly on scaling your company (we’ve worked with Uber, Amazon, Lyft, and Salesforce), get started for free here.

Business Mistake 1:
Diving into Multiple Ventures too Quickly

Every founder who has struggled to scale their business has often fallen into the same traps. Interestingly, even those who have successfully scaled have made these errors.

The first major mistake to steer clear of is launching new ventures before fully optimizing your initial business. I can personally attest to this, as my natural inclination is to chase new opportunities, often succumbing to the “shiny object syndrome.”

This tendency is not uncommon among entrepreneurs. We’re explorers at heart, fueled by dreams and visions of what could be. Issues arise when you spread yourself too thin — perhaps you start a software company here, dabble in blockchain there, and even venture into educational platforms. Before you know it, you’re also acquiring assets that don’t align with your core business.

The result? Your primary venture suffers.

This is a pattern I’ve observed frequently, especially among young agency owners. What often happens is that entrepreneurs end up with a portfolio of mediocre projects when they could have had one outstanding business. From my experience, those who claim to manage multiple businesses rarely perform as well as those who channel their energy into a single, focused endeavor.

The key takeaway is simple: If you don’t focus on your main business, it’s bound to fail.

Business Mistake 2:
Passive Team Development

The second common mistake is adopting a passive approach to team growth. We all have unique personalities, quirks, and backgrounds that shape us. In my own upbringing, I was accustomed to a “sink or swim” environment where I had to figure things out on my own. While this may work for some, it’s not a one-size-fits-all strategy for leadership.

As a business leader, you need to ask yourself: Is merely observing your team’s growth the best way to maximize their potential and, in turn, achieve your business goals? Can you afford to wait several months to see if an employee will develop the skills and mindset needed for success?

While it’s important to give team members time to adapt and grow, excessive leniency can be counterproductive and harmful to your business.

This passive approach, if applied universally, sets a precedent that others in the organization may follow, leading them to believe that minimal involvement is the norm.

This involves understanding their challenges, providing the necessary resources and support, removing obstacles, and holding them accountable to specific performance metrics. High expectations coupled with clear and direct feedback can go a long way in fostering a culture of excellence.

The key takeaway is simple: It’s crucial to actively facilitate your team’s development.

Business Mistake 3:
Over-Trusting and Under-Verifying

The third critical error in business is the “trust but don’t verify” approach to hiring.

Imagine you have a recruiter who is enthusiastic about the candidates they’re presenting, labeling them as absolute superstars. It’s tempting to take their word for it, as I once did. The fallout? We ended up hiring well-intentioned individuals who, unfortunately, were not the right fit for the roles they were placed in.

The repercussions of a bad hire are not just financial, although the cost can be as much as two to three times the employee’s salary. But beyond the monetary loss, there’s also the invaluable time wasted that could have been better spent searching for the right candidate. This not only benefits your company but also serves the interests of the candidates you might have otherwise overlooked.

As a leader, it’s your responsibility to scrutinize each hiring decision. When someone claims to be doing a good job or to be an excellent hire, ask for evidence. What are their credentials? What specific achievements can they point to? Do they align with your company’s values?

Sometimes, you may need to serve as the bottleneck in the hiring process to ensure that only the most suitable candidates move forward:

The key takeaway is simple: Effective hiring requires not just trust, but also thorough verification of a candidate’s fit for the role.

Business Mistake 4:
Hiring Based Solely on Potential

The fourth common mistake is hiring individuals based primarily on their potential.

As the author of a book called Leveling Up and a proponent of continuous improvement, I’m naturally inclined to invest in growth:

However, hiring solely based on potential rather than concrete competencies and alignment with core values has consistently led to disappointing outcomes.

When you’re in the hiring process, it’s crucial to identify the specific outcomes you’re seeking.

For example, if you’re hiring a CEO, ask whether they’ve managed a $100 million P&L, have experience building a C-suite, or have closed deals in the seven- to nine-figure range. Rate candidates on these competencies as well as their fit with your company’s values, using a grading system from A to F (just like in school).

And then, from there, you can craft your job description, and you can make sure that everyone is super aligned. As part of your recruiting process, there needs to be outcomes defined first. If there are no outcomes, there’s no scorecard, and then there’s no recruiting. Nothing else is going to happen.

This structured approach ensures that your job descriptions are precise and that everyone involved in the hiring process is on the same page. Without clearly defined outcomes and a corresponding scorecard, your recruiting efforts will lack direction and effectiveness.

On a related note, I run a mastermind group called “Leveling Up Founders” for entrepreneurs generating seven to nine figures in revenue:

We meet bi-annually in Beverly Hills and Miami, attracting top-tier professionals in media, marketing, and business. My podcast co-host Neil Patel is also a regular participant. This gathering of high-caliber individuals creates a synergistic environment where magic happens.

The key takeaway is simple: Hiring candidates based solely on their potential rather than on their core competencies and alignment with company values leads to poor outcomes.

Business Mistake 5:
Not Mindfully Transitioning

The fifth business mistake to address centers around the concept of “mindful transition,” a term I learned from entrepreneur Bob Glazer:

The essence of this idea is that if you need to let someone go, and you’ve had a strong working relationship with them but realize they’re no longer a fit for the company, you approach the situation delicately.

Instead of a blunt termination, you can say, “Let’s work on a mindful transition for you.” This means giving them a two-month notice, offering to make referrals, and allowing them to gradually phase out their responsibilities.

This approach has proven effective for me in the past, but it comes with a caveat: It’s most successful when applied to individuals with whom you’ve built a good rapport.

For instance, I have an ongoing, excellent relationship with one individual who was with the company for two to three years. When it became clear that the role was no longer a good fit for either of us, we mutually acknowledged it. Upon his giving notice, I was able to refer him to another opportunity where he’s now thriving financially.

We continue to maintain a strong relationship, communicating regularly and offering mutual support.

The key takeaway is simple: Mindful transitions, a respectful and gradual process of letting an employee go, is most effective when there’s a strong existing relationship between the employer and the employee.

Business Mistake 6:
Spoiling Your Staff with Perks

The sixth business mistake is the notion that lavishing employees with perks will make them perform better.

While our organization has experimented with offering various benefits and extra days off, the reality is that these incentives don’t necessarily elevate the performance of high achievers. What truly motivates top performers is engaging work, collaboration with other talented individuals and a sense of accomplishment. If they don’t find these elements in their work environment, they’re likely to seek opportunities elsewhere.

Interestingly, during exit interviews, departing employees often praise our excellent benefits, yet they’re still leaving. Okay, benefits were so amazing, but why didn’t they stay? It’s because it’s not about spoiling people. It’s about creating a work environment where they can excel.

The key takeaway is simple: Offering lavish perks and benefits is not sufficient to retain high-performing employees, who are more motivated by engaging work and a sense of accomplishment.

Business Mistake 7:
Sidelining Yourself in the Recruitment Process

The seventh mistake that founders commonly commit is sidelining themselves in the recruitment process.

As an entrepreneur and the founder, you have three pivotal roles:

• Crafting the company’s vision

• Ensuring financial stability

• Being hands-on in recruiting talent

Each individual you bring on board not only plays a part in shaping the company’s future, but also subtly influences its existing culture. This is why it’s essential to be intricately involved in the hiring process, much like industry titans such as:

• Steve Jobs, who personally interviewed the first 1,000 employees at Apple

• Tony Xu, co-founder of DoorDash, who took part in interviewing the initial 2,000 hires

• Elon Musk is known for interviewing a good chunk of the engineers in SpaceX’s early days

• Bill Gates was also known for being in on the interview process for Microsoft

• George Washington helped train 23,000 soldiers to build part of the army

When you relegate yourself to the later stages of recruitment, you run the risk of poor hiring choices, which can be regrettable especially after the company has already invested significant time and resources in assessments and multiple interview rounds.

At the end of the day, everything that happens that is good in the company is because of the people that you brought in, but everything that’s bad that happens is because of you, the founder,

Last Word on Business Mistakes That Will Kill Your Business

These are seven common blunders founders make that will prevent you from scaling your business. I hope they serve as cautionary tales for founders looking to grow their ventures!

By being mindful of these fatal errors, you can better position your business for long-term success. Don’t let these mistakes be the downfall of your business; instead, use them as guideposts on your journey to sustainable growth.

If you’re ready to level up your marketing strategy, Single Grain’s experts can help!👇

Get your free marketing plan

I hope you learned something new.

To your growth!
Eric SIu