Why you need to be wary of growing a ‘souffle business’
Are you at risk of growing a short-lived souffle business? Find out why they’re so risky, and how to avoid common mistakes.
It’s 12 years since we first launched Talented Ladies Club. And what a rollercoaster ride those 12 years have been! From the early days of knowing virtually nothing (in hindsight) about running a business, and making very little money, to confidently running a secure, growing global business with a consistent, healthy monthly profit.
Over those 12 years, I have watched other businesses launch – some of which have been successful, and some of which have sadly failed. Through my own experiences and watching others, I have built a wealth of knowledge, which I now use to mentor freelancers and small business owners. My focus is to help them grow profitable businesses they enjoy running in the time they have available to work.
And one thing I always caution entrepreneurs against, is creating what I call a ‘souffle business’. What does this mean? A souffle business is a business that grows very quickly in specific favourable conditions. However, when removed from those conditions (or when those conditions change), the business cannot sustain itself. Much in the same way a souffle can collapse when taken out of a hot oven.
Why do souffle businesses grow so fast – and why is that so dangerous?
So what causes a business to rise like a souffle? What kind of signs should you look out for and mistakes must you avoid?
A souffle business often grows fast, and achieves early success. However, this success can prevent important lessons being learned, and mask fundamental flaws in the business concept or structure.
When I look at some of the successful businesses that emerged around the same time as us, none of which are still trading now, I note that they all had powerful head starts from outside their business. Some had funding or grants that enabled them to launch with ready-made teams and invest in marketing, while others had powerful connections that ensured them the kind of generous media coverage only established businesses can usually earn.
The problem with having such a big leg up in the early days is that you don’t get the chance to really test your business idea. I liken it to building a vehicle that relies on fuel to run (whether that ‘fuel’ is funds or other external resources), rather than building a self-propelling vehicle that can run under its own steam.
When the funds eventually run out for these businesses, or fashions change and they’re no longer the hot, young kid on the block, they can struggle to keep going. This is when you’ll see them reduce the size of their teams, and give up their offices and shops. If the business owner is savvy, they’ll use this as a chance to regroup, and perhaps can salvage their business with a new structure, ideas or direction.
But if not, their business collapses.
Why coaching is a souffle business
The coaching world is a perfect example of this. I have seen people very quickly gain a big following and sell programmes and courses for eye-watering amounts – often with little experience to share with paying customers. (A perfect example of this is a woman offering to help established graphic designers achieve ‘five figure months’… when she herself only graduated from a graphic design course two years ago!)
Usually these wannabe coaches are following a system taught to them by their own coach to create and sell their offerings. (You can read here why I believe business coaching world is often like a pyramid scheme.) The problem with this system though, is that while it can deliver very impressive results, they are usually short term and come at a cost.
You see, the impressive turnover these coaches claim to make is often only achieved by investing a huge amount of money in a large team and spending on social media advertising. I have spoken to a few people who have earned a lot of money on paper following these systems, but actually made very little profit, if not a loss.
Take away the expensive teams and money to spend on Facebook and Instagram ads, and their businesses deflate pretty quickly.
I recently had a quick look of some of the people who signed up to one well-known coach’s programme a few years ago, all of whom praised the wisdom of the system they were using at that time – convinced it was going to make them rich. Only one person is in still in business today, and they parted ways with this coach quite quickly.
So please, if you are looking to grow your business, don’t fall for the seven figure coaching lies.
MLMs are a perfect example of souffle businesses over the past few years
The MLM industry is another example of the souffle effect. As social media became widely embraced over the past decade or so, MLMs saw huge growth. But the very same mass exposure that fuelled their success also became their downfall. This led to two fatal flaws: over-exposure to their sales tactics, and a growing anti-MLM movement.
You can see the pattern perfectly in the rise and fall of MLM Forever Living’s turnover:
You can spot exactly where Forever Living (and many other MLMs) had their ‘souffle moment’ – from 2014 to 2016. Once those perfect conditions had ended, the business returned to where it had been before, and has even continued shrinking further.
As desperately as companies like Forever Living may try to recapture this heyday, we believe it’s impossible. The conditions that led to their brief, spectacular growth cannot be replicated. The oven has gone cold. You can see plenty of evidence that MLMs appear to be dying out here.
So what does healthy business growth look like?
So if fast business growth, as exciting as it may be to experience, is potentially dangerous, what does healthy business growth look like? This is the most accurate illustration of business growth I could find:
As you can see, in the months/years growth is modest. During this time the entrepreneur is searching for the best problem-solution fit. Then, once they have proof of concept, they – again slowly – search for product-market fit, and language-market fit.
Next they start optimising their funnel and search for channel-product fit. It’s only after this phase that the business starts to see significant growth – as they pour on resources for growth and the business matures.
In simpler terms, the journey looks like this:
- Come up with your business idea – work out what problem you serve and for who
- Test the market to see who will buy, and what kind of messaging works best
- Plan your sales funnel and identity the right places/ways to market your offering
- Invest in growing your business – this can be hiring, outsourcing and/or mentoring
Each of these is an essential steps, and it takes time to experiment and get them right. If you try to shortcut this process, or miss out steps because you’ve achieved early success, you could find that success sadly short-lived.
How long does it take to grow a successful business?
How long should those steps take? Just how long does it take to grow a successful business? Our research shows that most small businesses take at least two or three years to make a profit, and become truly successful after seven to 10 years.
Even Jeff Bezos, the entrepreneur who started Amazon as an online used book retailer and eventually became the richest man in the world, has noted: “All ‘overnight’ successes take 10 years.”
So don’t worry if you’re not breaking out the champagne 18 months in, like some competitors may claim to be. Trust that it takes time and consistency to achieve lasting success.
How do you avoid growing a souffle business?
How, then, do you avoid growing a souffle business? Here are my top three recommendations based on years of personal experience, and mentoring other entrepreneurs.
1) Don’t be afraid to grow slowly
It’s inevitable that you will have teething problems and make mistakes as you shape your business. It’s much better to do this while you still have only a handful of customers or social media followers.
It’s also unlikely that your business idea emerged into the world perfect and fully-formed. Often people tweak their concept as they grow their business; they might even change direction completely.
As an example, I had no idea when we started Talented Ladies Club that I would create courses and run business mentoring programmes. This naturally evolved as my knowledge of what our audience needed, and how I could help, grew. And equally, some of the early ideas I had for monetising Talented Ladies Club never really took off.
So don’t berate yourself if you don’t immediately make that fabled six or seven figures. Grow your experience as you grow your business and you’ll be a more confident entrepreneur with a stronger (and more profitable) business. And if you do come across someone promising to help you make a lot of money fast… treat their claims with caution!
2) Always be innovating
Probably the biggest downfall that can come from early success is a mistaken belief that your idea is perfect, and that you don’t need to change it. I’ve seen one business fail partly because they missed opportunities to create further resources to help people who graduated from their only (hugely successful for a while) offering.
Another had immediate, flyaway success with a product that was very much of the moment. The trouble is that when that ‘moment’ passed, they didn’t have any more ideas, and the business inevitably collapsed.
The lesson? Don’t rest on your laurels – even if you are enjoying success that you can’t imagine ending. I encourage the people I work with to have multiple income streams in their business, to look for opportunities to build on what is working, and to try to anticipate and plan for any threats.
If you are ready with ideas and making plans, you won’t be blind-sided if a sure-thing suddenly runs out of steam. Always be innovating and you’ll never be caught out.
3) Watch your profits
As I have already touched on with the coaching example, an impressive turnover can blind people and convince them they have a successful business. But turnover isn’t the number you need to pay attention to – it’s profit. How much are you actually banking once you have paid for all your expenses? And is that income consistent and scalable? Or is it dependent on certain conditions?
I encourage everyone I work with to keep monthly profit and loss sheets so they can see what is coming in, and what is going out. At any point during the month they should know exactly how much money they have made, and what products or services is making them the most. They can also spot any downward or upward trends quickly, and react accordingly.
This might be leaning into more profitable income streams, moving resources away from products or services with waning popularity, or innovating to refresh offerings that are dating or have untapped potential.
This attention to the financial details gives you insights and control. You know where to focus your energies and resources, and can make informed decisions on how much you are willing to spend. You can also work out where you need to streamline process to make your business more efficient. It’s no surprise to me that once people start tracking their money they start making more of it!
Grow a profitable business that has longevity
It’s not hard to grow a profitable business that has longevity – you just need to follow good business practice. But this business practice is often overlooked in our get-rich-quick world where anyone can be an online success overnight (or so it can sometimes seem).
My recommendation is to avoid the temptations – and risks – of growing a business too fast. And instead take it slow, learn your lessons and build a strong, innovative and financially secure business that won’t deflate like a souffle the moment things don’t go your way.
Photo by Matthew Michael
