Most of us have listened to great business speakers, or read best-selling business books extolling the virtues of growth and the common denominators of growing businesses. Many large and mid-sized growing businesses have a “rock star” sales person, a terrific growth culture or sales processes involving cutting edge techniques and systems. These factors are indeed critical to growth, and are frequently missing in slow growth or stagnant businesses. But the biggest obstacles to growth for smaller businesses can be the CEO/owner’s lack of confidence, their fear of taking risks that are necessary to grow, or simply a comfort with the lifestyle that their current businesses provides them.
Do You Really Want to Grow?
I believe that what is often prevalent in low growth businesses is a deep seated and personal reluctance about the changes that are required to grow. Much of this can be identified by understanding the history of the business. What were the concepts and origins that led the owner to turn their personal skills into an actual business? How was the initial launch funded, and what personal investment or sacrifice did the owner make? Were there some make-or-break moments along the way in early years? If you get to the heart of these questions, you can see why first or second generation owners can be reluctant to take another round of even greater risks to get the company to the next level.
Getting Through No Man's Land
In most cases, CEO’s of small businesses are fiercely independent. And they also trust their own judgment. Why is this? Often early success came because the founder’s skills allowed them to create something out of nothing – and in the face of folks telling them they wouldn’t succeed. They took personal risk, built their own systems, sold their first customers, and wore all the hats of the management team. Once they had early success, they most likely built their initial team around their own administrative shortcomings and less valued tasks. Next, they added some folks in line positions where depth was needed, and from there started filling in management holes with talent that was available and willing to help a small company. This is all logical, and works well in getting past the high risk of start-up businesses. Once an owner has some initial success – it is easy to fall into a comfort zone – and to simply protect against those most significant start-up threats. In this way – they simply protect the existing lifestyle that their business has provided them. This isn’t enough to get to the next level of a business’ life cycle, and break through the adolescent stage. Or as we refer to it at Newport: getting through No Man’s Land.
Rare Indeed
The companies that make it through this stage of business are rare indeed. First and foremost, they’ve expanded beyond the comfort zone and personal capabilities of the owner/CEO. Getting there likely required bringing on key management executives who cost more – and who think and act more independently. And retaining those highly skilled management folks requires delegating more than just tasks. These individuals need to be motivated, guided but not micro-managed, and yet held accountable. Growing through this stage requires a CEO who is willing and effective at delegating, guiding and trusting people other than themselves to handle key customer relationships.
When CEOs see the emotional and behavioral changes needed to grow, what results is often a rationalization of the status quo – and a delay or half-hearted effort at real growth. Real growth requires a significant commitment and change management approach. This means identifying and overcoming the risk aversion that comes with the territory for most small business CEO’s. And it means risking a “comfortable” lifestyle business in order to create something more significant and lasting.
Greater Levels of Risk
Even if the CEO has hired folks capable of handling the critical customers, they still must take on greater levels of personal and financial risk to succeed. They also need the systems and processes that can drive larger businesses. This takes both financial resources and a willingness to rely on business models (information and processes) that the entrepreneur once felt compelled to escape.
After committing to take on the risk that growth can bring, it is critical that the culture of the business is aligned for growth. The quickest opportunity to do this is through a key management addition that demonstrates the change that is forthcoming. This outside person can bring the credibility to the rest of the organization that growth is possible – and can be a catalyst for the changes in systems and processes that the current employees have grown to resist. This can also provide outside financial resources with the confidence and track record they need to determine that the business is worth the risk of further investment.
Ultimately then, real growth potential is more than just having a product that is in demand and the ability to meet customer requirements. It starts with clearing the personal obstacles that allow a growth culture to develop. If this happens, a small business can grow to the point where it reaches its potential and provides the founder with numerous options for the future. But smaller business CEO’s also need to recognize that, without growth, small businesses aren’t likely to sustain a CEO’s lifestyle as long as desired.
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Contact Dave at dave.scudder@newportboardgroup.com
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