I recently had independent discussions with the two entrepreneurs who are currently the CEO’s of two successful small businesses. The businesses have been running for 4 and 6 years respectively, have strong order books, growing client bases and positive cash-flow. Both of them talked openly about how the act of actively growing their businesses had challenged pretty much everything in their business. Both had over time come to the conclusion that growth had become secondary to rather building a sustainable and better business. Here are some of the challenges I often here CEO’s of growing business talk about:
- Growth equals change in every aspect of the business – interpersonal relationships, people, operating habits, processes, business rules, policies, structure etc in ways that could not easily been envisaged and thus planned for. The pace of growth and the type of products or services offered (standard vs customised) has a big impact on how much additional change required active management. Fast growth in the production and delivery of non standard services or products is the toughest. You grow revenue and operational complexity.
- Human dynamics of growth is a never ending “beast” that requires constant attention. More people create more personality, work ethic, culture and value issues. Management structures typically lag operational change. Managing new off the ball conflict and group behavioural complexities not encountered before become a real strain on the business. These manifest in various forms including lack of delivery, suspect quality, loosing staff and clients, morale slumps etc. Figuring out where to focus your rectification efforts is a dynamic skill that only gets acquired over time. This element alone is exceptionally draining.
- Difficulties in building solid management teams. Growth often takes founders out of their hiring comfort zones with resultant bad hiring decisions. This was made worse by the performance impact this had on the extended team and the stress and cost of having to rectify these decisions. One bad appointment in a key position often significantly slows down operational momentum. Key value drivers become compromised during the repair process. One step forward two steps back! This problem is often compounded when internal resources have been overlooked for key managerial positions.
- The rate of new customer acquisition usually outstrips the rate of capability expansion. Book the revenue and then figure out how to deliver the goods. Key resources get overstretched, quality declines and stress and risk levels rise. In general, the faster you attempt to grow the better quality of people, team and leadership required. Finding really good people is often much harder than expected. Once attained, building productive team and leadership becomes a competency in itself. Often the underlying operational processes required to manage more clients, projects and people lack the maturity to deal with the unpredictability of events that need managing.
- The process is a continuous set of tradeoffs. Striking a balance between accepting new clients and building delivery capacity, developing internal skills versus hiring externally, deepening a position in a single market versus expanding into a new market, growing revenue versus focusing on margin improvement first. Making good decisions all the time, while under financial, project delivery or sales pressure becomes more challenging the larger you get and the faster you are trying to scale.
- The business moves from a fun exciting start-up that the founder(s) feeds off emotionally to a place of disillusionment and frustration. This leads to them questioning their relationship with their business. The grind associated with having to design, create and manage the enabling processes, operating habits, values through best intention trial and error is not what they envisaged the growth process to be about. Revenue might be growing but so is the amount of infrastructural process, systems, people, customer and financial management burden of keeping the machine working. Striking a balance between the rate and type of growth and the capabilities and competencies required to manage the resultant change is the perpetual challenge.
Building a better business becomes the mantra. Simply growing revenue year on year becomes questioned as a strategy. Growth in all aspects of the business needed to happen for the right reasons.