Recent data collected in a survey by CB Insights, a global market intelligence platform on startups and innovation, reveal that scaling without structure continues to be one of the main causes of company failure in the global context. Research shows, for example, that 38% of startups they close due to lack of cash and 42% due to lack of real demand, problems that worsen when business initiatives grow before organizing their operations.

In Brazil, the warning is even more striking: more than 8 thousand startups closed activities in the last decade, many of them after cycles of expansion without adequate governance, according to a study promoted by Distrito, a company specialized in the innovation and technology ecosystem.

The scenario suggests a trend in which companies are able to scale quickly, but do not always keep up with this pace with adequate processes, management and governance. Expansion without structural bases, therefore, can generate adverse effects, such as increased costs, rework and difficulties in decision-making, as explained by Rodrigo Baraldi, lawyer, strategic M&A advisor and author of the book “365 days to become the owner your company needs”.

In his experience with companies from different sectors, Rodrigo Baraldi observes that many businesses reach new levels of revenue without the owner or management having adapted processes, functions and internal structures to keep up with this progress. Based on this context, there are signs that indicate when growth may be occurring without adequate control. Check it out!

1. Operation predictability decreases

Companies undergoing disorderly expansion have difficulty answering basic questions about margins, costs and cash generation. The lack of structured financial control turns growth into a trial and error process.

When the increase in revenue is not accompanied by clear processes, rework, errors and operational crises tend to grow. Productivity drops and costs become more difficult to control.

3. Decisions still depend exclusively on the owner

Businesses that remain founder-centric, even with growth, can become less efficient. Lack of delegation and poorly defined roles can compromise the ability to execute and respond quickly to market demands.

4. Customer understanding does not keep up with sales

Growing without validating processes or consolidating the product-market fit, in other words, the product’s adherence to real demand can transform each new customer into additional cost. Expansion based solely on market perception can generate inconsistencies in the operation and customer experience.

5. Governance does not keep up with expansion

Conflicts between partners, informal decisions and lack of clear rules tend to arise in times of accelerated growth. The absence of a legal and governance structure can compromise the value of the business and reduce the interest of investors.

According to lawyer Rodrigo Baraldi, these signs indicate that the company is at a stage where growth and structure need to go hand in hand. Market data reinforces that uncontrolled growth is not rare, and that the ability to organize internal processes, define functions and monitor financial indicators is crucial to the sustainability of the business.

By Milena Almeida