From Start-up to Glow-up: Successfully Grow your Small Business
One of the reasons I started Vita Nova Strategy was because I regularly saw small and mid-size businesses fail to meet the challenges (and opportunities) that occur at different stages of growth in their companies. Although it’s true that every business is unique, most (if not all) businesses experience similar challenges as they grow, particularly during the first 5-10 years where failure most often results from inadequate management, ineffective business planning and marketing mishaps.
How these challenges are (or are not) addressed can make or break your business.
The good news? The timing of these factors are fairly predictable, and when you understand where your company is in its growth, you will be better equipped to diagnose root causes, overcome challenges, and prepare for the future.
Table of Contents:
Factors That Impact Every Growth Stage
Stages of Growth in Small and Mid-Size Businesses (SMBs)
What Happens During Early Stages of Business Growth?
What Happens During Later Stages of Business Growth?
Get the Right Support Just When You Need It
Factors That Impact Every Growth Stage
Running a successful business is challenging, stressful, and complex. On any given day, leaders wear multiple hats and make decisions about:
financial resources (cash flow, payroll, loans, grants)
personnel (# of people, quality of people, depth of expertise, professional development)
short-term and long-term goals
marketing
sales
client relations
vendors / external partners
partnerships
technology
The list goes on, but I’ll stop there. The point? ALL of these factors can impact an organization’s ability to grow. They drive the need for change.
Within this whirlwind, it becomes increasingly difficult to see the forest for the trees, prioritize, and find balance. Understanding the factors that affect growth at early stages and how you can avoid common pitfalls is vital, but the first step is knowing when these growth stages most often occur.
Stages of Growth in Small and Mid-Size Businesses (SMBs)
In my experience, an excellent indicator of where you are in your growth journey is the number of employees you have.
That’s not to say that other factors, such as number of locations, complexity of the offering, service vs. product, or rate-of-change in technology aren’t also important. After all, we are living in a time when AI is literally changing everything. It just means that the number of employees you have can give you a good sense of where you are, where you’re going, and what challenges you should anticipate along the way.
While the specific employee size ranges might differ slightly, the broader concept that stages of growth can be defined by the number of employees in an organization is typically attributed to James Noel Fisher, author of the book Navigating the Growth Curve: How Breakthrough Companies Achieve Predictable, Exponential Change.
What Happens During Early Stages of Business Growth?
Startup and Ramp Up – The Journey from 1-19 Employees
Typically, businesses hit the Startup and Ramp Up milestones within the first 5–10 years, meaning it’s the most critical time in a company’s growth.
During this time period, the following are key factors that affect business growth:
Delegation
Documentation
Communication
The Financial Chicken Dance
Client Retention
People
Strategy
Delegation - shift from doing to delegating
TLDR - if you don’t delegate, your business won’t grow or, worse, will fail.
In the early stages of a business, success is largely built on your talents — how well you sell, produce, innovate, etc. Juggling the roles of leader, visionary, catalyst, manager, and founder as your company grows can lead to burnout and is, frankly, a recipe for disaster. You need to determine where your time is best spent and where you need to shift a portion of your time from doing to delegating.
“Focus your time on high-impact tasks and the things that align with your purpose.”
Are you a visionary but find yourself consistently putting out fires in operations? Are you a great sales person and love solving your clients’ problems but find yourself spending hours every week doing financials instead of networking and selling?
Where do you want to invest your time and social energy? What are the things that excite you, inspire you – the things you really look forward to doing?
For some guidance on how to identify your high-impact tasks and things that align with your purpose, check out Chapter 2: The Power of Purpose in Amy Jen Su’s book The Leader You Want to Be. In doing so, you’ll not only position yourself for growth, but you’ll better manage your own time and energy.
“The rest? Delegate it.”
Delegating is hard for business leaders, especially founders, but it’s a necessity. Those who can’t, won’t, or falsely delegate create bottlenecks, alienate talented team members, stunt their company’s growth, and worst of all, never unlock innovation and leadership in their teams. Those who do delegate successfully unlock potential in their teams and open up opportunities for themselves to innovate and achieve new goals.
Though Fisher’s model notes Delegation as the third stage of business growth (20-34 employees), I rarely see a business make it to the third stage if they haven’t already successfully delegated. Delegation happens in two phases - first you have to begin doing it; second you have to refine it through more sophisticated management structures and nurturing your teams. Fisher’s model is really more about the latter, so I’ll cover the first step of beginning to do it here.
“Get over yourself and your need for control.”
That sounds harsh, but honestly it needs to be said. So many businesses fail because the founders and first executives think they are the only ones who can do something…or everything…or who can do it the best. That’s fine if you don’t want to grow, but if you want to grow, you need to understand that utilizing the unique skills and talents of others can create the biggest breakthroughs in your company. Not convinced yet? Not sure how to delegate? I’ll cover more on this topic later, but in the meantime, check out this great article by Harvard Business Review - To Be a Great Leader, You Have to Learn How to Delegate Well, and one of my favorite books by Dan Sullivan - Who Not How.
Lean on external partners.
At this stage of growth in an organization, in addition to delegating internally, there is a greater need for external resources (which is essentially delegating externally, but comes with more complexity) — and implementing technology solutions.
“Call in the experts – ditch the favors from friends.”
Relying on favors from friends and free technology often runs out during this stage and/or it’s no longer the best option for where you are in your growth. This may include services like accounting, legal, HR/benefits, and marketing, as well as technology solutions like a CRM, project management tools, time tracking software, and paid levels of communication tools (e.g., Slack and Zoom).
Identifying, vetting, and managing external partners (or “vendor management”) and technology solutions may be something you want to hold close at first, but managing these partners and solutions will need to become part of a team member’s or other leader’s responsibilities eventually.
In some growing companies, there aren’t ideal candidates within the organization to delegate to, and additionally, there may be things you’re not currently doing, aren’t great at, and/or are not core to your business’ products or services and would be better handled by external experts. In any of these cases, delegating externally may be the right path.
“Though in the long term delegating internally is the most ideal option for key business functions and long-term growth, in the short term it may require delegating externally. ”
For repetitive, time-consuming tasks like scheduling, invoicing, and reporting, consider an intern or an assistant. In his book 10x is Easier Than 2x, Dan Sullivan notes adamantly that the first thing an owner/executive should do to elevate and grow their business is to hire an assistant. I’ll never forget reading this and thinking how obvious it was. Almost every business owner or executive I talk to needs an assistant, but for some reason they’re hesitant to do so and I can’t for the life of me figure out why! There are great, reputable organizations out there (like My VA Rocks) that offer virtual assistants that can handle these types of tasks and other things like travel planning, bookkeeping, powerpoint presentations, prepping and formatting content and documents, digital organization and so much more.
Stop for a minute. Think about the amount of time each week you spend on tasks that don’t light your fire, you’re not great at, could benefit from someone else’s perspective and talents, or simply take time away from more valuable business growth initiatives that you should be focusing on. Now, imagine not doing any of those things – how would you spend your time?
Documentation - get it out of your head and onto paper
TLDR - if you don’t document, you won’t be able to delegate scalably.
You can’t delegate until you get all the things out of your head and onto paper. Whether you do that yourself or solicit help, it has to be done.
Once you’ve determined the tasks and responsibilities you want to peel off, you need to be able to articulate the ‘what’ and the ‘why’ to someone else. You may be tempted to set up meetings and brain dump on the people you choose to delegate to, but I caution you against this. It’s not enough – it’s not scalable. Enter the proverbial bus, a better job offer, an unexpected medical leave, etc. You have to write it down or you risk having to start from scratch.
“Your documentation doesn’t need to be perfect; in fact, it shouldn’t be. ”
Your goal should be to transition work to others who can do it better than you. They can build on what you started with the important foundational understanding of why you do what you do the way you do it and make it better. Approaching delegation in this way helps a young business grow into a more professional organization while also allowing you to retain the company’s entrepreneurial spirit and qualities.
Communication - communicate, communicate, communicate
TLDR - if you’re not communicating, things fall apart.
Delegation often leads to new company hierarchies. One team will split into multiple teams, which necessitates managers and more formal reporting structures, productivity tracking and different channels and methods of communication.
As your business grows, you will need ways to keep a pulse on the most important aspects and key metrics of your business. At its core, all of this revolves around clear communication – and it will become key to your success (or failure) at this stage of growth. You’ll need new structures and SOPs for formal reporting, team meetings, one-on-one meetings, company updates, asynchronous communication, real-time communication, etc.
“Without these communication structures, a lot of things fall apart at this stage of growth – for you and your team. ”
You may find yourself spending too much time asking for (or digging up) updates and, worse, you may begin micromanaging your team (which, honestly, no one wants). You may find yourself blaming others for not meeting expectations you never clearly communicated in the first place. You’ll get crossed wires within and between teams.
At the end of the day, when you don’t have good communication structures, you and your team will spend a lot of time on things that are not value-add to your business, draining enthusiasm and depleting morale. And worst, worst case scenario, this will bleed into how you communicate with your clients. All of this is avoidable with clear communication.
There’s a lot to be said about the hows of good communication, so we’ll revisit it later in more detail. For now I’ll give a plug for you to begin exploring a good business operating system (BOS). Although a great BOS lays the foundation and provides the framework for these types of communications, your organization may not be ready to implement it wholesale at this point. It’s not that you can’t or shouldn’t – I just often find that implementing a BOS is not a priority for startups and ramp-ups. What you can do at these stages is be familiar with a business operating system, such as the Entrepreneurial Operating System (EOS), and begin implementing some of the components around communication.
The financial chicken dance
All these costs…it’s time to seriously look at ways to maximize your organization’s profitability and balance expenses vs. revenue. Then, there’s the chicken dance (which comes first, the chicken or the egg?).
Do you hire or engage external partners for growth (risky in today’s economy)?
Do you wait until you grow to hire or engage external partners (risky because you may lose clients because you’re not staffed properly)?
The short answer - it depends. There is no one answer that fits all small businesses. What has become abundantly clear to me over the years is that there are some very common mistakes organizations make and key factors they overlook when trying to maximize their profitability.
Common Mistakes and Key Overlooked Factors:
Waiting too long to hire or engage external partners, burning out staff and negatively impacting delivery and client satisfaction.
Hiring based on hope, optimism, and false signals rather than data, leading to layoffs and decreased profitability.
Not using existing resources wisely and not leveraging technology for efficiency
Not charging enough for products or services (and not recognizing the need to improve product or client satisfaction to be able to charge more).
Not having a plan and acting solely from your gut without consideration of your data, evaluation points, triggers, etc.
“Evaluating expenses vs. revenue is way more than a numbers game – it requires strategic thinking and information gathering. ”
It requires a plan and, ideally, input from your team. IMHO, if your CFO is driving the decisions, you’re doing it wrong. They should absolutely be included in the conversation, but I have never seen a good chicken dance resulting from siloed financial decisions by someone disconnected from the products, services, and clients.
Client retention during growth
Scaling and changing parts of the business (e.g., production, delivery, pricing) can put a real strain on client retention. Your organization must simultaneously manage internal and external factors and expectations. Although it’s inevitable to have some client attrition during growth, I’ve seen organizations lose a LOT of clients as they attempt to scale. Why? Below are the most common mistakes and overlooked factors I’ve seen that cause clients to leave as you scale.
Common Mistakes and Key Overlooked Factors:
Not communicating with your clients about changes.
Pushing current clients to buy your new products or services that are beyond their current needs.
Adding offerings that are outside your core products or services to accommodate a small percentage of your clients or that you do not have expertise or training in.
Focusing too much on the new and neglecting the old. In other words, reducing time spent ensuring your current clients are satisfied and their expectations are being met.
Not asking for grace from your clients in advance of and during changes and asking for their feedback.
Adding responsibilities to team members without consideration of their work loads, thus reducing their ability to execute the new while maintaining the old.
People - get the right people in the right seats
One of the hardest parts of growing a small business is realizing that the people you have may not be the people you need to grow. Growth puts a magnifying glass on team members who are not currently meeting the needs of the business or will be unable to meet the needs ahead. It also highlights that there are roles that don’t currently exist that need to be created.
I often find that leaders inherently know this, but they fail to make any changes. They feel a sense of commitment to their team members, or are operating out of fear (of change, of losing institutional knowledge, of upsetting clients, of retaliation, etc.).
There are many options to consider when looking at people and roles (upskilling, firing, re-org, etc.). The bottom line is that you can’t ignore it because it will hinder your ability to grow.
Strategy - it’s time to get strategic
Somewhat formalized strategic planning takes place during this early growth stage. Many companies in these stages have a revenue target, defined goals and objectives, and an idea of how they’re going to get there. In other words, a plan exists but it may be “squishy”, not formalized, and not broadly communicated throughout the organization.
Much can be said about strategic planning, but this blog post is already long, so let’s focus in on some of the most important, often overlooked factors of strategic planning.
Do some groundwork before launching full force into strategic planning.
Having a firm understanding of your team, your clients’ needs, and your growth goals are vital elements to going into any strategic planning. Many leaders fail to socialize what they’re thinking with their clients and their team prior to making an official strategic plan. This is a big miss. Successful leaders engage their teams and clients in the “pre-planning process” to ensure they are not missing important information (challenges, opportunities, roadblocks, push back points, etc.).
Plan for how you’ll execute your strategic plan.
“Strategic plans don’t complete themselves. ”
You’ve completed your plan and you feel good about it. Everything is going to be great. Or is it? Many leaders rush out of strategic planning and don’t have a plan for how they will communicate it to their team, execute it, or track progress against it. If you create a strategic plan and skip these elements, you may as well not have wasted the time on creating the plan.
What Happens During Later Stages of Business Growth?
We’ve covered Startup and Ramp Up, but what happens next?
Standby for future blog posts on the following later stages of business growth:
Delegation: 20–34 employees
Professional: 35–57 employees
Integration: 58–95 employees
Strategic: 96–105 employees
Visionary: 161–350 employees
Get the Right Support Just When You Need It
Starting and scaling a business is an exciting journey. Understanding that your challenges are typically symptoms of deeper root causes will go a long way in helping you pinpoint where to start executing your solutions.
Like most journeys in life, we can’t (and shouldn’t) do it alone. Avoid the pitfalls of small business failure by engaging a trusted advisor and strategic partner to help you navigate your business growth.
Find out how Vita Nova Strategy can help you uncover root causes, overcome challenges, and create sustainable growth.
