Growth in your small business is great… but growth produces complexity.
When your business is small you have a small number of functions. But as profit and sales grow and the number of employees grows, the need for more and specialized functions also grows.
- HR needs become more varied processes
- Financial reporting becomes more intricate
- Sales tracking becomes more multifaceted
- Operational processes multiply and become more precise
- Relationships with customers, suppliers and vendors become more sophisticated, and on and on…
Business owners are often the head of everything. If we drew your org chart, your name would be in the top center box with a title like Owner, President, or CEO. And would your name also be in most every box in the next row underneath it? Are you also the:
- Sales and Marketing Manager
- CFO
- Operations Manager
- Head of Information Technology
- HR Manager
Every small business will hit this critical point of complexity eventually. It happens gradually so that it can sneak up on you. You become aware of feeling overwhelmed. You haven’t had a vacation in years, You’re not enjoying the work. Important tasks are falling through the cracks on a regular basis.
Verne Harnish quantified it in his book, Scaling Up. He says the rule of thumb is that when growth doubles, complexity increases 12 times! Growing from 3 to 4 employees, for example, produces a 33% increase in personnel but a 400% increase in complexity!
The rules change as growth produces complexity. Management activities that worked before won’t
work forever. If you don’t know what to do differently, you keep managing the business the same way you always have.
To deal with this explosion in complexity, consider a number of foundational changes in the way you manage your company. If growth produces complexity, as complexity increases, so should CAPACITY. Here are a number of changes you may want to consider in the way you manage your business:
1. To grow capacity in the least expensive way, you want to add support staff to key people who are feeling the pinch of time constraints. The goal is to transfer lower-value activities to people you pay less in order to maximize your investment in highly compensated leaders thereby producing the greatest return on their unique skills and experience.
We know it worries you to add overhead costs but scaling up capacity requires investments… the right investments. We’ve never seen a small business owner add additional support staff and have it fail to produce a significant return. As you and your key managers regain the capacity to think and plan and innovate, your business is positioned to grow!
2. Building your leadership team is a critical foundational element necessary to manage the complexity that comes from your company’s growth. Identifying leaders and clarifying their areas of responsibility allows you to delegate to them, essentially multiplying your personal capacity many-fold. And it doesn’t cost a thing.
3. We’ve talked about the need for regular planning in many prior blogposts. We recommend taking time out of the day-to-day business once per quarter to update your plan. (See our quarterly Growth Plan Workshop here). As you begin to work through others, it’s vital to regularly provide a clear vision for what you want them to accomplish in the upcoming quarters so that they and you can move fast. Conversely, a lack of clarity among those who report to you breeds confusion, frustration, and uncertainly that can bring the best organization to its knees!
4. Creating a Meeting Rhythm is the engine that drives focus, accountability, accomplishment and growth. A Meeting Rhythm is a set of regularly scheduled weekly, monthly, quarterly, and annual meetings you have with your various direct reports including regular meetings your managers have with their direct reports. Keeping to a Meeting Rhythm is how you execute your plans and turn them into reality.
5. Building systems and processes is key to having a solid foundation from which to grow. Business owner beware—growth will test your processes and break them if you don’t continually enhance them! It’s difficult, but we always challenge clients to assess their processes and systems at their busiest time of year because THAT is where the cracks will show first!
If your business isn’t growing, it’s dying. So it’s probably growing, and that’s what you want! But growth produces complexity eventually in every small business. Instead of waiting until you’re overwhelmed and operating inefficiently, call one of our business coaches and get your 2021 started off strong.
Running a business is ultimately about having fun and making your community better. Making some specific changes to the way you manage your business will insure that you achieve both. It will also enable you to continue to love what you do… and to retain some semblance of balance between your business and personal life.
P.S. Click here to hear our founder talk about how your small business could benefit from business coaching.
P.S.S. On Jan 28 our financial expert and business coach Brad Justus will conduct the Small Business Finance Workshop. Bring your numbers and walk away with a documented month-by-month 2021 budget for your business. Learn more and enroll here.
