Newport Board Group Chairman Doug Tatum was recently interviewed on UNC TV, the PBS affiliate in Chapel Hill, North Carolina.

Tatum, who is an Entrepreneur in Residence at the Jim Moran Institute for Global Entrepreneurship at Florida State University and Vice-Chairman of the Board of the Association for Corporate Growth (ACG), an organization representing middle market private capital investors, presented a wide-ranging series of perspectives on the entrepreneurial economy.

He focused on the challenges that middle market companies encounter in No Man’s Land. At this point in their evolution, a company’s growth typically levels out. The company feels stuck, too big to be small and too small to be big. What has worked well in the past seems to have lost its magic.

In the interview, Doug emphasized the importance of these emerging growth companies to the economy and to American society. He explained that existing second-stage growth companies are the economy’s engine of job creation. By contrast, start-up companies die at about the same rate they arise so they are a less reliable source of new employment.  

The Challenges of No Man's Land 

Doug went on to stress a critical transition that growing companies face on their way to achieving scale and producing real wealth for their investors. As firms expand from their early stages to greater maturity, their organization and operations become more complex and inter-dependent. New management skills are called for.

For example, leadership of the marketing and sales function may require an executive who can build and manage marketing alliances and channels, a common strategy to drive growth without requiring a lot of working capital. The person who has headed up marketing and sales to date may not be up to this challenge.

At this critical juncture in their development, companies need to move from a loyalty-based culture to one based on performance. The founder/CEO may face the painful challenge of saying to people who have been an integral part of their company: “I could not have gotten this business as far as it has come without you. But unfortunately I have to let you go.” Doing this, compassionately yet decisively, is the kind of hurdle that companies must get over if they are to transition out of No Man’s Land.

Doug mentioned another challenge that growing companies face: the Capital Gap. This refers to moving beyond early stage financing, i.e., the founder’s credit cards, loans and investment from friends and family and advances from sympathetic vendors, to more stable sources of funding. Entrepreneurs must squarely face the issue of risk. They tend to be optimistic and focused on the upside. They often fail to see that raising debt or equity capital requires that they reduce both the appearance and reality of risk in their business.

How Newport Board Group Can Help Growing Businesses

Doug wound up the interview with a few words about Newport Board Group, the company he chairs. He explained that companies with 30-100 (or as many as 150) employees are the focus of Newport’s advisory services. He explained that Newport advisors challenge boards to take a strategic view of the business and envision “what the end of the movie looks like.” 

Finally, he mentioned that he strongly disagrees with the widely held view that entrepreneurs cannot run really large businesses. He started Newport with a goal of helping entrepreneurs develop advanced management capabilities, which will give them confidence that they can get their company out of No Man's Land and grow it into a large enterprise. Not every entrepreneur is going to be Bill Gates or Mark Zuckerberg. But Doug and Newport believe that many are capable of converting their passion for business innovation into running a large business.

To watch the interview, click here.

Prepare to Move Beyond the Capital Gap