It turns out there are some concrete secrets to entrepreneurial success, whether you’re a start-up or an established venture. For the most part, it all comes down to growing smartly and not letting booming growth overwhelm your business.
So says Edward Hess, a professor of business administration at the University of Virginia, who recently published Growing an Entrepreneurial Business: Concepts & Cases. When researching 54 high-growth entrepreneurial companies with an average of $60 million in revenue, he made this discovery: Not all growth is good, and it needs to be tamed.
Consider this road-tested advice Hess gleaned from successful entrepreneurs.
Learn to manage your company’s growth
Let up on the growth gas pedal so your staff and systems can catch up. “You have to pace growth,” says Hess. “So many entrepreneurs lost their businesses because the growth overwhelmed them, and they didn’t have the right people, processes and controls — both quality controls and financial controls — in place.”
Take the long view
As your company takes off, spend time away from the business to think macro instead of micro. You need to see the big picture to know which direction to head and map out a plan for getting there.
Prepare for growth
Line up systems to accommodate future business growth, and remember to keep adjusting as you expand. That might mean instituting hiring processes to systematically bring on the right people or developing customer service programs. “Too many people don’t plan for growth,” says Hess. Then when it hits, they make hiring or financial mistakes.
Learn to say no
Not all business is good business. “The more I said no, the faster I grew,” one entrepreneur reported. So turn down work that doesn’t fit your mission or expertise. Work with customers who help hone your brand and reputation, offer repeat business, or serve as referrals.
“The best entrepreneurs hire slowly and fire fast, but almost everybody else does the opposite,” Hess says. “Many entrepreneurs had to make two to five hires to get to the right person. This is extremely inefficient and costly.”
Instead, hire a former co-worker or someone your employees know and trust, Hess notes. Have candidates interview with numerous employees, and then hire people on probation to make sure they’re the right talent and fit for your culture.
Speed up payments
New ventures often run into trouble when they have to spend money on employees and supplies upfront, but don’t receive payment on their invoices for 45 to 90 days. When your company confronts cash-flow issues, get inventive. Offer existing customers a 5 percent discount if they pay you in 14 days. That way you won’t need as much cash on hand.
Provide ‘fire extinguishers’
Minimize the chaos of a growing company by documenting processes and procedures that will arm your employees to fight fires. Otherwise, you’ll personally contend with the same crises over and over again. Require your employees to write instructions for how to do their jobs; if they get sick, go on vacation or quit, you can maintain consistency in your business operations. “There should be no single point of failure in a business,” adds Hess.
Don’t listen to the hype
One of the most common mantras in business is “Grow or die.” Hess searched far and wide to find empirical evidence to support that claim and never found it. “You need to improve or you will die. You have to stay better than the competition and you can’t take your customers for granted,” he adds. “You have to be better, faster and cheaper — constantly.”
Once you’ve mastered steady improvement, things will really take off. Just remember to ease off the gas occasionally so you can pace your growth.
Source: FedEx Small Business Center, https://smallbusiness.fedex.com/business-growth.html