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The Founder’s dilemma – Managing the transformation from start-up to growth business

November 19, 2015

Business growth can be characterised in several ways – sales, profit, employees…. and looking to make the business scalable and capable of achieving sustainable profitable growth is a fully understandable objective.

However, whichever way you look at it, the underlying driver is likely to be that the founder wants to look beyond funding his or her lifestyle and start seeking value creation.

It all begins with the owner-manager taking the leader’s role. He or she will undertake activities based on the desire to make their dream happen; they will take calculated risks, work hard, control pretty much everything, and aim to have fun.

They will gradually assemble tools and methodologies to help them work smarter not harder. And they will be driven by achieving results that demonstrate value is being created.

Warning signals

Despite everything they are doing certain pressures start to build as they move from comfortably funding their lifestyle. Some of the warning signals are:

  • Not enough time
  • Pressure on product and market development as customers demand more of them
  • True experts needed to fill big gaps in functional expertise
  • Competitive heat as others respond to their presence
  • Their people don’t feel empowered but they don’t think they are micro-managing!
  • No one shares their sense of urgency
  • The business is beginning to control them rather than the other way round
  • Management information is becoming neither timely, relevant or meaningful
  • Product and client profitability are becoming unclear
  • Cash management is getting more complex

There is also a Darwinian process at work. Darwin realised that life forms needed to reproduce to survive, and that regularly there were more than the environment could support. A lack of resources put pressure on population size, which led to increased competition, and some would not survive.

Furthermore, those who died were not totally random; the more suited were the more likely to survive. So there was a “weeding out’ of less suited organisms leading to the survival of those better suited. In other words, Darwin deduced that organisms evolve over time.

Two critical streams

We therefore have two separate ‘streams’ to consider:From Crew To Captain: Commander of the Fleet

  • The growth stages of our business
  • The evolution of the founder’s role at each stage

Note – we already believe that it’s not how fast or smart we are… it’s our ability to adapt that determines whether our business – and ourselves – will survive.

Let us just consider some of the characteristics of successful business, who have figured out the need to evolve and adapt. Typically they:

  • Have a clear strategy and vision
  • Know when and how to exit their business
  • Organise their business around systems, not people
  • Know how to recruit and retain people
  • Know their market position or niche
  • Have an efficient “sales machine”
  • Plan and control their finances
  • ‘Manage’ rather than ‘do’
  • Have an effective board structure
  • Seek advice

You may want to benchmark yourself against these characteristics – how are you doing?

So, you have recognised that your business might need to change, and that you are going to have to change with it!

Change must be managed for the business to grow

Managing change in a big organisation is fraught with disaster. It’s not necessarily any easier in a growing business. If you are the founder it starts with you. How do you feel about hiring other people and letting go? Do you trust other people to do the job as well as you? How do you feel about hiring people who are smarter than you? How do you feel about the possibility of managing “on” the business as opposed to “in” it?

These are all tricky questions, but ones which you need to address if you are going to achieve the sustainable profitable growth for which you are striving.

One key issue which arises quite quickly is keeping track of everything in your own head – as the founder and “boss” you knew everything, but all of a sudden it’s hard to know personally every prospect, client, or supplier. How do you keep tabs on everything?

There are probably four areas you need to look at:

  • People
  • Structure
  • Process
  • Technology

People in a growing business

Firstly: people. It starts with you. In terms of Emotional Intelligence and Self-Awareness, how are you placed to lead by example in terms of embracing change? Can you adapt your behaviour to help others cope with change when they prefer stability? Are they as excited as you are about changes in pace, responsibility, and overall structure?

If your staff are not “on the bus” with you then it is going to be very difficult if not impossible, so how will you make it happen? Your communication with them will be vital. The failure of many change initiatives is attributed in whole, or in part, to failures in communications.

These guides can help you to successfully manage and motivate staff;

Structure in a growing business

In terms of structure, how do you need to be organised to make the business scalable and capable of sustainable profitable growth? You need to be constantly thinking about the structure you need to get through today, and at the same time the structure you need to get you to the next level.

How can you become, and remain, both efficient and effective? It is important to work back from the client perspective – how do you ensure client No.100 enjoys the same level of client service as client No.1?

Process in a growing business

Process is very important. You know you have “cracked it” when your key staff tell new employees, “This is the way we do stuff around here”. Processes and procedures for winning clients (sales) and making them happy (delivery) need to be documented and regularly updated.

Technology in a growing business

And then there is technology. This is particularly important if your business model is “low cost” as opposed to “differentiation” or “niche” where using technology to automate may be less critical. Technology can help you streamline tasks so that your operating margins are at worst sustained and hopefully improved.

If you can focus on these four areas, without losing sight of the characteristics of a successful business, then you may well have a platform and methodology to secure the sustainable profitable growth which you are seeking.

About the author

This guide has been written for ByteStart by David Mellor, consultant, lecturer and author of From Crew To Captain, a trilogy of books designed to help people make the transition from working for a large institution to working for themselves. The third instalment, From Crew To Captain: Commander of the Fleet is published in November 2015.

More help on successfully growing your business

You will find more help and advice on how to grow your business in these other popular ByteStart guides;

And these will help you to fund your growth;