How to Take the Guesswork Out of Growing Your Business

The honeymoon is over. You have your start up capital, you ramped up to 4 – 6 employees pretty quickly and now the fun begins.

Getting out of the gate with a new company isn’t easy but it’s a cake walk compared to creating a consistently profitable business that you can run and not have it run you.
I talk to business owners every day. They are struggling to keep their focus on the constant barrage of issues they have to deal with in a fast-growing enterprise. Their companies have quickly grown beyond the owners’ ability to manage everything.

That happens, by the way, as soon as you start adding full time employee to the mix.

In a nine year research study by Origin Institute, a research, consulting company out of Boulder, CO, of entrepreneurial companies along the Front Range of Colorado and California’s Silicon Valley, the trigger to growth trauma wasn’t brought on by an increase in revenue/sales or profits. It was brought on by an increase in the number of people in a company.

Intuitively, business owners know when growth trauma is occurring. I knew it as I grew a company from 2 employees to over 100 employees. I recognized the signs of growth impact early on in our company’s life cycle when we watched profits dip, customer satisfaction decline, morale issues surface.
What I didn’t understand were the exact reasons for the decline. I did have a general belief that it was more difficult to keep pace with the requirements the additional staff demanded and the feeling that what we did last week no longer worked this week.

Wish I knew then what I know now.

The complexity of any organization is increased because of the number of people, not the amount of revenue, you have. Money and processes are easy to manage compared to the dynamic impact that people bring to the table.

The 7 Stages of Growth entrepreneurial research study turned into an enterprise development model that I use daily in my executive training programs with business owners.
This model helps business owners get ahead of growth issues, actually allows them to predict growth impact and helps them understand what they have to do to manage their company as they add more people.
A Stage One company, (there are 7 Stages that cover companies up to 350 employees) or Start Up, has 1 – 10 employees.

A Stage One company is CEO centric – meaning the CEO is likely the ‘specialist’ who has created a product or service and is now getting her idea to take shape. Therefore, 50% of your time should be spent as the technician or the specialist while only 10% of your time will be spent as a manager.

As a company grows, so must the leader. Each stage of growth will require something different from the leader. Understanding what is required of you as your company evolves can either propel the company forward or cause the company to become ‘stuck’ – profits never materialize; sales suffer; there is high employee turnover.

The Five Non-Negotiable Leadership Rules for a Stage One company:

1. You must generate, track and preserve cash
2. You must focus 80% of your resources on selling the 2 – 3 offerings with the best margins
3. You must hire for ‘how the person fits in with the team’ first and second, for how competent they are
4. Waste no time trying to ‘stabilize’ your company – embrace chaos – command the team and inspire the employees
5. Establish regular one-on-one meetings with each employee designed to build a company-wide performance mindset, feedback loop and employee development

Survival is the name of the game in a Stage One company. As you grow closer to Stage Two (10 – 19 employees) it shifts to being about growth. Stage Two is about supporting higher sales levels and making a profit.

The bottom line in understanding the 7 Stages of Growth that all companies go through is that the complexity of an organization will always extract its due.

Next installment: Explore the 5 top challenges for a Stage Two company with 11 – 19 employees.