As businesses grow, they hit “ceilings of complexity” that often stop them on their growth journey.
Typical stall points happen at $1 million, $10 million, $20 million, $50 million, $100 million and $250 million.
Why? Because what got you to where you are likely won’t get you to where you want to go.
Breaking through these barriers as companies grow is a key to their continued success.
Here are five big ones and how to break through them:
Customers aren’t all equally valuable; some can even be unprofitable.
So CEO Scot Lowry of digital-marketing firm Fathom, in Valley View, Ohio, had his chief financial officer draft a profit-and-loss statement for each one. That helped him phase out the costly customers – and identify the ideal ones, such as health care and financial services firms that need very customized service.
“Our strategy is based on deep customer intimacy,” he said. “We have to focus on select clients to deliver on this.”
Many companies don’t want to invest in new software for accounting, customer-relations management and other operating systems as they grow because they’re pricey. But procrastinating will lead to chaos and mistakes when you need to tackle tasks that should be easy to do instantly, such as updating customers’ addresses in all your records at once.
If your company has hit 50 to 100 employees without upgrading its systems, don’t delay any more. It’s an emergency.
It’s tempting just to stuff this important document in a drawer and forget it.
With his now nearly 150-person team squabbling over priorities and resources, Lowry shredded his organization chart and reorganized everyone into teams dedicated to specific accounts. He is listed at the bottom, with the role of helping employees serve clients at the firm, which expects $20 million in sales this year.
“I stopped talking about my ‘direct reports’ and switched to calling them my ‘direct supports,’ ” he said.
And it’s not just about rearranging the chairs on the deck, but also establishing new chairs and bringing new talent to sit in those chairs that will help the company break through the level of complexity it is facing.
In the startup phase, you’ve got to rely on your instincts because there are no historical data to guide you. But intuition often deceives CEOs as their businesses become more complex, said Sunny Vanderbeck, managing partner at Satori Capital, a Dallas-based firm that invests in growing, profitable companies.
If you’re not letting data drive decisions, such as what products to develop or which customers are worth pitching, he said, “you’re missing out.”
Companies often outgrow the founders’ ability to lead them because the CEOs don’t sharpen their management skills.
Stephen Covey, author of “The 7 Habits of Highly Effective People,” identified one of the habits as “sharpening the saw” – taking time out of the rat race to build production capacity through the personal renewal of the physical, mental, social, emotional and spiritual dimensions of your life.
“If your company is growing 30 percent a year, you have to be 30 percent better by this time next year,” Vanderbeck said.
Learn from other CEOs by joining a peer group such as Entrepreneurs’ Organization, Young Presidents’ Organization or Vistage.
“If you aren’t a learner, you are the reason the company isn’t as big as it could be,” Vanderbeck said.