The honeymoon is over. You have your start-up capital, you quickly ramped up to 4 – 6 employees and now the fun begins.
Getting out of the gate with a new company is not easy, but it’s a cake walk compared to creating a consistently profitable business that you run – rather than have it run you.
The reality is that business owners continue to struggle trying 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 six-year research study of entrepreneurial companies along the Front Range and Silicon Valley, the trigger to growth trauma was not an increase in revenue/sales or profits. It was an increase in the number of people in a company.
Signs of Growth Trauma
Intuitively, business owners know when growth trauma is occurring. A business owner can recognize the signs of growth impact early on in his/her company’s life cycle: they experience a dip in profits, customer satisfaction decline, and employee-morale issues surface.
According to the 7 Stages of Growth enterprise development model, the complexity of any organization is increased because of the number of people, not the amount of revenue. Money and processes are easy to manage compared to the dynamic impact that people bring to the table.
The 7 Stages of Growth model says there are 7 Stages that cover companies up to 500 employees. The Start Up stage, or Stage 1, describes companies with 1 – 10 employees.
A Stage 1 company is CEO centric – meaning the CEO is likely the ‘specialist’ who has created a product or service and now is getting her idea to take shape. Therefore, at this stage 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.
Leader Must Grow Too
As a company grows so must the leader. Each stage of growth will require something different from the leader. Your ability to understand what is required of you as your company evolves will help determine if you propel the company forward — or if the company becomes ‘stuck’ – profits never materialize; sales suffer; employee turnover skyrockets.
The Five Non-Negotiable Leadership Rules for a Stage 1 company:
- Generate, track and preserve cash. (Get tips on how to do this here)
- Focus 80% of your resources on selling the 2 – 3 offerings with the best margins (Get tips on how to do this here)
- Hire for ‘how the person fits in with the team’ first — and second, for how competent they are (Get tips on how to do this here)
- Waste no time trying to ‘stabilize’ your company – embrace chaos – command the team and inspire the employees (Get tips on how to do this here)
- Establish regular one-on-one meetings with each employee designed to build a company-wide performance mindset, feedback loop and employee development (Get tips on how to do this here)
Survival is the name of the game in a Stage 1 company. As you grow closer to Stage 2 (10 – 19 employees) the focus should shift to sales growth. Once you reach Stage 2, you will need to focus on supporting higher sales levels and making a profit.
This article, derived from content created by FlashPoint!, is based on the 7 Stages of Growth concepts developed by the Origin Institute and James Fischer. It was contributed by Jacqueline Sousa, a certified Growth Curve Specialist and regional director of the Florida SBDC at FIU.