And how they can make or break your business
Did you know that removing the barriers to complexity can help you to successfully scale your business?
Here is an overview of the four stages of scaling up:
- Startup: 1-5 employees
- Grow up: 6-15 employees
- Scale-up: 16-250 employees
- Dominate your industry: 250+ employees
Why do we categorise these stages in terms of employees and not revenue?
The first reason is that revenue and success can vary across different countries.
The second reason is the fact that an increase in revenue doesn’t lead to complexity – people do.
A crash course in complexity…
In his best-selling book “Scaling Up: How a Few Companies Make It … and Why the Rest Don’t” Verne Harnish explains how complexity is the key source of failure to scale:
- Think back to when your company was just the founder, an assistant, and a plan on the back of a napkin. This start-up situation represents only 2 channels of communication (or degrees of complexity).
- Add a third person (or customer or location or product) and the degree of complexity triples from 2 to 6.
- Add a fourth, and it quadruples to 24. Expanding from 3 to 4 people grows the team by only 33%, yet increases complexity by up to 400%.
“Scaling up is every entrepreneur’s dream – and nightmare. Hypergrowth is terrifying, and it’s most often success that kills great companies.” – Verne Harnish, Scaling Up: How a Few Companies Make It … and Why the Rest Don’t
Let’s define business growth…
When your business is growing, you are increasing:
- market share
And the complexity just keeps growing exponentially:
In studying how to conquer complexity, Harnish identified three fundamental barriers to scaling up a venture that are brought on by this complexity:
- Leadership: the inability to grow enough leaders throughout the organisation who have the capabilities to delegate and predict.
- Scalable Infrastructure: the lack of systems and structures (physical and organisational) to handle the quagmire in communication and decisions that come with growth.
- Marketing: the failure to scale up an effective marketing function to both attract new relationships (customers, talent, etc.) to the business and address the increased competitive pressures (and eroded margins) as you scale.
If you remove these barriers, what once was a weight keeping you down becomes the wind at your back pushing you forward.
The key is to put your focus into overcoming these three fundamental barriers.
Back to the stages of growth…
The 4 Stages of Growth is a roadmap developed by Daniel Marcos, CEO Growth Institute. In his article “Evolve Yourself to Scale Your Business” he explains how your focus, priorities, and key decisions will change as your company grows.
Before we dive into what to expect at each of the four key stages of business growth, here’s something interesting you should know.
To go from one stage to the next, you have to unlearn everything you learned that got you to that first stage. Then, relearn new things to get you to the next one.
Think of it like driving a car.
Once you reach a certain speed, the gear that got you there will not get you to the next level of speed. You need to shift gears. If you don’t, your engine will burn out.
Stage 1 – Start Up: usually 1-5 employees
You, the leader, are everything. You are the centre of the company and end up being a jack-of-all-trades.
At this stage, your focus is product development validating your business model.
Most companies that succeed end up selling a product or service very different from what the founders thought the market needed at first.
Stage 2 – Grow Up: usually 6-15 employees
You are now a more focused leader. The company now depends on other people executing their tasks.
At this stage, your focus is 100% on sales and your priority is hiring the right team.
Why sales? Now you have bills and salaries to pay.
It’s both humbling and scary when you first realise that you are not only responsible to serve a community of clients and partners, but also that your team and their families depend on the success of your business.
Hiring the right team is important at this stage, as now you’re delegating and no longer have direct influence on the product you’re selling.
Stage 3 – Scale Up: usually 15-250 employees
You are a leader of leaders. Your company has validated its product and you’re aligning and simplifying processes. You’re betting on a select number of products, and trying to 10x, 100x, or 1000x them.
Your focus is defining your place in the industry and your priority is to scale.
Previously, your competition didn’t even know who you were. Now, you have the chance to start challenging their place in the market by inserting yourself.
You will only move to the next stage if you set your company for scale in terms of infrastructure, people and processes.
Stage 4 – Industry Domination: usually over 250 employees
You start fighting a battle to win the market and you control a significant percentage of it.
Your focus is dominating the industry. Your priority is continually reinventing your business.
Usually, when leaders get to this stage, they develop a sense of accomplishment. Everything seems to indicate that if they keep on doing what they are doing, they’ll maintain their status.
This is how, slowly but surely, companies lose their strength and are eventually put out of business by a newer, smaller and faster player in the market.
Learn how to navigate these four stages of growth to come out on top!
I have written a short 20-page eBook on the “7 Keys to Double the Revenue & 10X Your Business Value in 3 Years or Less.” Reach out to us at: [email protected] if you would like a complimentary copy.
In the meantime, if you’re serious about 10X your business value, get started by scheduling a free strategy session.
In 30 short minutes, we’ll give you the exact blueprint we’ve used with dozens of businesses to double their revenue fast and we’ll even share a few secrets you can use to 10X your business value.
This is a completely free, no-obligation strategy session.
I hope you have enjoyed these insights. Have a great week and stay growth-focused!