eli5: What does it mean when they say “this company grew too big too quickly”?

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eli5: What does it mean when they say “this company grew too big too quickly”?

In: Economics
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Usually it means that the company tried to open too many locations, by taking on a mountain of debt, and ended up going bankrupt or close to it and closing down a lot of location.

Great example of this in recent times is Quiznos. They opened up sandwich shops everywhere near where I live. They borrowed a ton of money to do this. In the end, most individual stores were profitable, but not enough that the parent company could make the loan payments. So they had to file for bankruptcy.

Currently there are only about 300 left, when at the peak there was close to 5000.

Likely to mean that the management or owners of the company were unprepared to deal with the complexities that growth brought about. Small companies generally work with a high degree of informal systems and procedures. High growth usually requires hiring more people very quickly. The influx of a lot of new employees means the informal system doesn’t work any more causing loss of efficiency, waste or customer issues. All companies also rely on external suppliers and high growth can outstrip supplier’s capacity.