At what point does a business outgrow its management capabilities?
I have learned from my business experience many entrepreneurs are only able to grow a business to a certain level on their own before things around them begin falling apart from a management or operational standpoint. I believe the reason for this is, because the management style when a business is new or is developing tends to be more liberal than as one required when the business has grown larger.
For reasons unknown to me, entrepreneurs push back at a time when they should be pushing forward by adding critical management people to their staff. Maybe it is because the business has been their baby, and they are unwilling to let go. Or it is possible they continue to see their business as a baby, and do not understand it has grown to some level of adulthood—where the business requires a different type of attention.
What might be a sign some help is needed in the sales and administrative department? Jim Grew, President of The Grew Company has this insight on the topic: “This is a frog in a kettle situation (kettle heats so slowly frog doesn’t notice and dies). Everything goes well until it slips a bit. The slip is small, so there’s no flashing light warning of either dramatic lost profit or impending financial trouble. The first sign of slipping is a dialog about how ‘we just need to get more sales.’ Worse, instead of building the valuation of the business, as earnings growth slows valuation slides at 4 to 6 times EBITDA. The question is not ‘how are we doing?’ It’s ‘How could we be doing?'” By the time most entrepreneurs figure this out, many opportunities have passed, it becomes almost impossible to reach the next level.
When coaching business owners, I often explain they cannot continue to manage as before. Their business has grown and the number of people employed has risen, which requires more structure and a more disciplined form of management. That management team should have the necessary skill sets and experience to set in place the mechanisms to increase revenue and profitability, which Jim Grew referenced.
It is the mature and wise entrepreneur that is willing to hire capable people to help get their business to the next level. It might mean also the “small family” atmosphere has to change due to the growth in employee population, but it doesn’t mean the culture of the company caring for its people has to change.
My counsel to the entrepreneur is not to fear letting others help and to delegate. A key to growth is to hire smart and intelligent people, and let them do what they do best. It might be the toughest decision an entrepreneur has to make, but if it isn’t made, the future of the business will be one of uncertainty.