This was more than 10 years ago but I still remember it well. I was walking to lunch with a friend and long-time business planning client talking about our growth at Palo Alto Software. We had doubled revenue in the previous two years. These were good times. But my friend had a warning:
Be especially careful at this point. It’s two times harder to go from 25 employees to 50 than from 10 to 25.
That didn’t make sense to me then, but it does now. It’s related to culture and accountability and leadership. What reminded me was Josh Linkner’s 5 Traps to Avoid When Growing Your Business on Inc.com. Especially his #3, which he calls “Putting Religion Ahead of Science.”
When you were a start-up, all you had was your vision and belief (aka “religion”). Your burning desire fueled you and the company to break through start-up gravity and get your business off the ground. As you grow, however, religion alone won’t be enough to sustain your trajectory. My business partner, Dan Gilbert, often says, “What got you here won’t get you there.” In most companies’ evolution, there comes a point where systems have to be documented, training materials established, and processes architected (aka “science”). Without this foundation, a company fueled only by passion derails, since your 126th employee won’t possess the same fire as team member No. 6.
The emphasis there is mine, by the way.
Josh has several other good points on this list. Gorging opportunities, for example, meaning trying to do too much. This is also really good:
Remember this: More companies die of indigestion than starvation. When you look back five years from now, your success will based much more on the times you said “no” rather than the times you said “yes.” As the old Chinese proverb states wisely, “Chase two rabbits and both will escape.”
Good stuff. Nice post. And we don’t talk enough about this second inflection point, getting a company through its adolescence. It’s hard to do.
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Hey Tim, great post. Really great post.
Great meeting you down in Roseburg at the angel meeting (I was the young guy to your right… wanted to grab your ear for a sec but we were all in a hurry to get out of there. Maybe next time 🙂
Just recently I’ve been unwinding a period where I’d been saying “yes” to too much as an entrepreneur. Funny how a little success in business breeds optimism… the optimism opens up your eyes to more opportunity… and those combined make it way to easy to say “yes” to things you know that you’re capable of… without realizing that you just added another rabbit to the mix to chase into the forest.
About 6 months ago I finally realized it (after flat grown in both companies in 2011) and the first half of 2012 was unwinding the lowest leverage (and least fun) projects (selling my highest revenue company June 1st to get that off my plate so I could focus on the more fun and higher long-term leverage projects moving forward).
Whew, what a ride it’s been. The past year was a learning year… and the analogy of the two rabbits is dead on… I lived it… and “it just don’t work” 🙂
Thanks Tim! Great blog. Love it.
– Trevor
PS – Question for ya… do you guys have a business plan for real estate investors? Reason I ask… I own a website that gets a lot of traffic… and one of our pages on making a business plan for investors ranks really really well and we get a good bit of traffic to it monthly. Would love to sell a business plan specific to investors as an affiliate on that page if you have one. Lemme know when you get a chance 🙂
In a case like this, I guess that new strategies, systems and processes are so tricky to implement because they don’t quite fit the fly by the seat of the pants operating style of a fast growing small company. Seems a bit like what happens when a bright young person who has done well in school gets their first real job (one with meaningful decision-making capacity, and complexity). It’s a new world for them, and they flounder at first. Eventually, they adapt, or they fail.
This is certainly interesting, considering that I’ve seen you as a champion for the agile business model. Sounds like that sort of agility in process and planning works very well for startups. But when you get to a company that’s growing beyond the startup phase, it’s important to create systems and knowledge documentation to ensure scalability. Right now we’re working on culture preservation and sustaining the passion for the purpose of helping small businesses succeed. But there is definitely the belief that culture is what will sustain us over the long haul; with the idea that happy employees make happy customers and happy customers make happy shareholders.