In the very busy field of startup advice, something that often gets missed is what to do once things really start to take off.According to Verne Harnish, the founder and CEO of strategic planning and executive education company Gazelles, that’s one of the scariest parts for founders, where they run into serious roadblocks.
“As they tend to grow these companies,” Harnish said, “the weight of adding employees and customers almost starts to weigh them down the point where they want to throw it all [away] and just go back to the point where it was just them and their assistant working out of a garage.”
This is a slightly edited transcript of our conversation.
So in a way, what makes these guys so successful leads them to roadblocks?
It does. The big roadblock is about 50-70 employees. It’s that day they walk in and there’s this employee whose name they don’t know. It’s like “Who’s that?” All of a sudden their small company has grown beyond their ability to kind of control it and they need to start to have to put some systems in place. …At about 50-60 employees you have to keep everybody headed the same direction on the same page, but they don’t have the page to put everybody on.
What’s the biggest misconception you correct?
With those that are in the one per cent, and anybody over a million dollars in revenue is in a very elite group of companies, I think the big misconception is that they will know how to manage that, that the company, when it gets big, will be the same as when its small, and that’s just not the case.
You run into three roadblocks. The first is their own ability to be able to let go and let other people start to do things. Most of these entrepreneurs, they’re really good at a lot of things and its hard for them to let go. And if they don’t, as they grow it just buries them. The second one is, they need to get some systems in place that they didn’t need when they were small. It starts out with accounting systems. Later on its big CRM systems and integrating all of their operations, getting all of those things in place in order to manage the chaos that starts to exponentially increase as you add people to the process. And the third one, up to about $10 million in revenue, you’re in your own way and you have to figure out how to get out of it. Above $10 million, you’re starting to mess with big company’s market spaces, and you’ve got big enough contracts with customers that they start to put price pressure on you. So you’re getting squeezed by customers for discounts, you’ve got competitors starting to come into your market because, $10 million, it’s worth going after, and a whole bunch of external competitive pressures that you have to deal with. So up to $10 million, it’s internal, over $10 million its external and you still have the internal stuff, so we try to help them through that.
What’s the hardest habit for entrepreneurs to adopt?
Usually when you say “routines or habits” to these guys they almost start to get the shakes, they start to get a little twitch. Inevitably, they like to see themselves as kind of free form and unencumbered. In a way they pride themselves a little bit in being, not undisciplined, but as having escaped the corporate bureaucracies that many of us abhor.
But, what they quickly discover and we teach them is that there are a couple of routines and habits that are necessary if they want to keep this beast that they’re growing under control, and to your point the toughest is an effective meeting rhythm.
Because most people can’t stand meetings, especially entrepreneurs unless its with a customer and they kind of try to ind of grout grow things free form, and they find very quickly that the minute you get a second employee, …your first issue becomes communications. If you don’t get some effective approaches in place to deal with these kind of communications challenges, you might be able to hold it together up to a dozen or so employees, but again at 40, 50, 60 you start to lose control. So the first thing we put in place is kind of an effective daily, weekly, monthly, quarterly meeting rhythm, this heart beat of the business so you have effective communication and thus alignment happening inside the organisation. We teach them how a quick 15 minute daily will save everyone an hour to an hour and a half so they can get on this other side of eating up their entire week just managing the place.
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