Pain, change, and business growth

I shared a little bit of my own story about a family business turnaround in a previous story here on Medium. In the end, few of the people in the top level management positions survived that turn around yet none of them were simply fired. Most left on their own accord as new, and fair, expectations were placed on the leadership of the business that they themselves realized they did not have the capacity to fulfill. I always looked back in my mind seeing this a case where the world was changing around a business that refused to keep up. In other words, the problem was a management team that was disconnected from the changing needs and expectations of the world around it. That is until I heard Clate Mask, the CEO of Infusionsoft, speak at a Genius Network office meeting…

Clate talked about his observed fact that companies go through very specific stages of scale. If the people, process, and systems of a business were staying stagnant the growth of the company would not push through these stages. On the path from zero to $10 million in annual sales a company would hit these stages — from 0 to 300k, from 300k to 1M, from 1M to 3M, and then from 3M to 10M. As a general rule there would be two stages to go through for every 10x increase in sales. So to get to $100M you would have the same challenge getting through $30M in between before reaching the final challenge of $100M. What Clate found seeing his customers go through the same pains as he made him realize that this was beyond coincidence or otherwise applicable to only a small subset of industries — this seemed to be a law of business growth.

Vision, people, and personal growth are the three areas of focus that must be addressed to get past these stages of growth. For our family business we hit the $30M barrier and blew past it with pure momentum all the way to $45M but then faced bankruptcy because those areas of focus were ignored. Yes, the world changed around us. However, looking back that was always true and the overriding reason we could not get to the next stage in growth was exactly what Clate was describing. Coincidentally the solution we found, 20 years before hearing Clate talk, was exactly what he described as well. The company tuned and communicated its vision to become an acquirer in a consolidating industry, I started the people equation from the top down by hiring a COO the business could grow into, and for myself it was the beginning of making a deep commitment in my own personal growth which still continues today.

On vision Clate recommends reading Beyond Entrepreneurship: Turning Your Business into an Enduring Great Company.

On people Clate commented for your leadership team: good people can grow with you for one stage (3x bigger than where you are now), great people can grow with you for two stages (10x bigger than where you are now), and almost nobody can grow with you for more than two stages. You can take time to grow your leadership into new levels of competence but that means pausing your business for years before moving onto the next stage of growth. The nearly fatal mistake our family business made was to move onto the next stage of growth without pausing nor upgrading our leadership team to keep going.

On yourself as the owner, personal growth is the only way keep going. For me personally, with zero previous experience, I saw the business grow 10x from the start of the turnaround to the time I sold it. Coincidentally, or more likely realizing one of the laws of growth Clate has now defined, I felt I could no longer see it go further after that 10x increase. It reached a stage where selling the success was far more comfortable than trying to take it further. In the end, your success will never exceed your personal growth and though I have continued to grow over the years that have followed that sale I have chosen to focus on areas that started over in new places for me rather than continuing on a path that I truly felt was not in my destiny for life.

Life is not a race to 10x your business, it is an art to 10x your life. — Joe Foley

Knowing these laws of business will not completely remove the pain of growth. It will, however, make you more prepared to handle the cost of that success when you find it. Only 3% of businesses ever make it to the $1M level. With odds that are so much against success to begin with you need use everything in your toolbox to keep going and make it further.

(Originally posted on Medium)