Growing Pains

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I had an interesting conversation the other day with a young man I have coached in business the past couple of years.  He question to me was simple but without a simple answer:

“How do I know if I want my business to get bigger?”

After speaking with him for a while, his dilemma was finally made clear to me.  The problem he was having was one of scale.  A little history is helpful here.  He had started his business several years ago, by himself. Over the years, it has grown and flourished.  But now he is at a crossroads.  The reason he asked me if he should try to make the business bigger is because he is still the “center” of the business.

By that I mean that whatever happened in his business, any major decision and even many minor ones had to go through him.  What’s more, his expertise was what drove the business.  If he was not available for a client, then there would be no business conducted.  He not only was the center of the business, he was the business.  Well, the fact is that when you are the business, your business can’t grow past a certain point because you can only do so many things at one time.  And, at some point, your performance diminishes; you make mistakes and lose business.

When I told my friend that the only way he could grow his business further would be for him to stop being the center of his business, he was uncomfortable with that idea.  When I pressed him on the issue, he said that he wanted the business to grow, but was afraid to let go.

But the fact is he had grown as much as he could with himself at the center of the business.  So the real question wasn’t could he grow his business, but how could he grow his business?  And, it was obvious that fear played a role in preventing him from taking the right and necessary steps.  Once we found out the “why” of his business plateau, we could then address the “how.”

This crossroads I mentioned is where a change of thinking must take place in the mind of the business owner.  This is also where small businesses become bigger -- or fail altogether – if the thinking is not followed by the right steps.

Here’s what I mean.  The process and business plan or model that makes a small business successful are usually not what will allow the small business grow past a certain point.  To get past that point, a change in how the business is run is necessary, which requires a change of mentality on the part of the owner.  In my friend’s case, he had to get over his fear of losing control.

But losing a little bit of control can be a very good thing.  And, it can also be a very profitable move.  So, the steps necessary to begin to reorganize the business for growth will involve two factors:  People and task delegation.  Obviously, good people are important, otherwise everything falls apart.  My friend’s case was not unique at all; I told him that he needed to replace himself at least three or four times with new and capable people in order for growth to occur.  He needed to distinguish crucial but minor tasks in the business from crucial and major tasks.

The reason to make that distinction is that it allows clarity in terms of who you need to hire and what you are hiring them to do.  For example, I said to my friend that “if you are handling clients after the sale, you shouldn’t be.”  Well, he was and he was wasting his time and talent.  I suggested that by hiring customer relations people, the clients will be getting better care faster, and he would be free to go out and get new clients.  So by determine the crucial but minor tasks, he was able to identify what he needed to have done, and therefore hire the right people to do it.

The second part of that distinction, crucial and major tasks, takes a little more finesse and strategy, but the basic concept is the same.  I suggested to my friend to consider his “replacements” at the executive level as he would assess a business opportunity—use a cost-benefit analysis and determine where the biggest need and biggest return would be for each of the executive functions that he currently performed in his work.  Once he did so, he was able to prioritize his needs, identify the necessary characteristics of potential candidates, and then begin his search for replacements.

Replacing himself with people who were as smart, or hopefully smarter than himself would be just like getting an upgraded laptop—it works better, faster, and can do more things.  And, you still control what it actually does.  When I put it in those terms, my friend was much more comfortable with the concept of duplicating himself and allowing the business to grow, rather than paralyzed with fear that he would “lose” control.

Finally, I suggested that he may even consider taking on an equity partner or investor if it would allow the scaling up process and business generation process to go faster.  That is a big step, but usually a very necessary one; the capital needed to grow a business from say $5 million in revenues to $25 million usually takes more than is generated by the current business model.  Those discussions can be complex, but can be handled relatively smoothly if expectations are realistic on both sides.  It is enough here to say that capital infusion should not be off the table.  It may be necessary in another, later step, but it’s a good place to be when you reach that point.

So let’s recap what happened:  In order to grow your business past the point of a “one-man show,” you must take apart your current business model, and rebuild it so that it can handle scale.  You must also change your own thinking and mentality about growth, understand your limitations, and get past them stepping back from your business and looking at it objectively.  In doing so, you will lose your fear about the control issue, and at the same time, allow your business to reach its full potential.

All the best,

George

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