From 'Startup' to 'Scale Up'

Moving from working 'in ' the business to working 'on' the business

There are lots of small businesses that do a fantastic job of getting themselves up and running when they launch. They successfully grow to a team of 10 to 20 people with anything from $1.5 to $5 M in revenue and are led by a driven charismatic super smart founder or co-founders. However then they stop there. For a variety of reasons they don’t continue to grow rapidly from that point on.

Sometimes it by choice. The business is highly profitable, the founders are enjoying themselves, are happily engaged day to day  and not killing themselves with stress. Sometimes it is a lifestyle business. More often than not though businesses simply get stuck. Just to be clear there is nothing wrong with building a business to this size and then slowing growth to 10% year on year. It takes a huge amount of hard work, determination and dedication to build such a business.

However quite a few founders get frustrated. Year after year they make their plans to grow rapidly and scale and year after year they seem to remain where they are.

The issue is the subtle but important difference of working in the business as opposed to working on the business.

Every founder is passionate about their business. It’s what drives your success and fuels you through all the hard times. This passion, especially if you’re bootstrapping, usually means you are at the coalface in every part of the business from product development, through sales to account management to managing cash flow. Even if you’re not personally involved in actually doing everything, it still all has to be signed off by you. By exerting complete control over your business you are able to maintain an almost ruthless grip on quality assurance  in every aspect, ensuring the business runs exactly as you envisage and to the standards that you want. You are also inadvertently a block.

It’s a simple fact that there are only 24 hours in the day and 7 days in the week so if everything has to go through you then the laws of maths means that however hard you work you will be unable to grow quickly once you have reached a certain point. Not only that but, while you are working in the business, you are not creating the mental time you need to step back and work on the business by which I mean the future strategic direction and the tactics required to get you there.

This requires a 20,000 ft approach initially in order to get the objective view that you need. Time needs to be spent not dealing with the day to day but meeting with clients and potential clients to better understand the opportunities, trend and where things are going. What are your next market opportunities? What new markets should you be thinking about? What new set of products should you be investing in to fuel your next stage of growth? All of this takes time to consider and then decide and then incredibly careful and detailed planning in order to execute. This is what I mean by working on the business. It can not be done while you are in the business 24/7, involved in everything and making every decision. You become stuck at the coalface.

You need to genuinely delegate decision making and not just for small decisions but also bigger ones. A weekly or even twice weekly management meeting to guide your team and keep you informed should be enough to manage this. On the other hand you can’t just let go of the business and step completely back or you’ll end up in a mess and potentially going to the wall. You also can’t rely on the board as they can only react to what you present to them. Even mentors can only advise on the thinking that you discuss with them- they can’t actually do it for you.  You have to gradually move from in the business to on the business.

This is not easy. This is your baby and any kind of delegation feels like letting go of something that is precious and that you have built coupled with the fear that its now going to go wrong.  I recommend a 90/10 ‘in the business’ vs ‘on the business’ initially and then as your team grow in confidence and you become more and more assured of their ability to run things you can gradually switch so that ultimately you end up 20/80.

To do this you need to have the right people working with you and also bring in the right people to help you. Both of these are fraught with risk.

The team already in place may not be fit for purpose. Incredibly loyal team members who have been with you along time may just not be able to step up for this phase of growth. As Victor Cruz explains as he built VC Innovations this can lead to awkward but brutally honest conversations that you need to have

You need new additional skills and talents and this potentially requires you to unfortunately be ruthless with some team members. Unhappily this can lead to team members leaving and needing replacing.

Some may need to leave, some may see new people come in ahead of them and decide to leave, some may be happy to stay and others hopefully will be able or willing to respond and be part of your next phase of growth. Either way there will plenty of change ands this can lead to destabilisation of product and delivery and revenue risk if not managed carefully.

Mohit Sagar explains as he built OpenGov Asia you must be very clear eyed and objective in assessing what you have and what you will need. This also usually means bringing in new senior team members. As I know to from my own personal experience and discuss with Mohit https://www.linkedin.com/feed/update/urn:li:activity:7389904015565737984 this can blow up in your face if you get it wrong and there’s a 50/50 chance you will at first. Experienced people often come from more traditional established backgrounds and can find it hard to fit into a startup culture and mentality. They can bring bad behaviours that they have unwittingly learnt elsewhere. This can create negative ripples that upset the culture. Given their increased cost you must be absolutely eagle eyed in their first 90-180 days to make sure this doesn’t happen and that you have got the right person. Fractional roles are increasingly popular as one way to mitigate against this risk. Personally I’m against consultants unless they are clearly tied to the execution and implementation as well as helping to develop the strategy.

For all these risks change if managed correctly can bring renewed growth and vigour to your business. The roadblocks you need to navigate around are simply growing pains. They will occur as you enter this exciting new phase but if you want grow 25- 50% year on year with your now established business, then you must start to work on the business and step back from being always in the business.