How to prepare for business growth
Growing a business.
This is what almost everyone in business wants.
You want more customers, more revenue, more freedom.
And for most people, when they are getting started, it’s just all about getting by.
Getting the first customers in the door.
Getting stable.
Getting marketing and lead generation working.
Yet once you finally figure out marketing… and you have a product that people want….
Then the game changes.
This post is NOT about how to generate new customers so your business can grow.
This post is about the challenges that come when your business starts to hit rapid growth… and what you can do to prepare for it.
Exiting the “Finding early customers” phase of the business
For most entrepreneurs, their early career is riddled by the simple problem of “Finding more customers”.
That’s their uphill battle everyday.
They have a good product or service, and it’s now all about learning marketing and figuring out how to get more people to buy it.
There are millions of books about marketing and sales that will help you through this phase.
Here’s a summary of Phase 1…
Learn Marketing.
Learn Sales.
Test marketing channels.
Find things that work that bring you new customers.
Repeat the things that work and turn those into systems that continue bringing in new customers.
Now… once you have phase 1 working…
You enter a whole new challenge.
Growing the business.
The rest of this post details my journey with handling the rapid growth of my business over the past few years. And what landmines to look out for.
The Challenges of a Rapidly Growing Business
I’ll start here by listing out the key challenges of a rapidly growing challenge, and then dive into each more in further depth.
Scaling service delivery while maintaining quality
Recruiting and hiring new team members to execute the work
Building or hiring leaders who can take ownership over portions of the business (and letting go)
Understanding finances as the numbers begin to get bigger and bigger
Cash flow issues created by rapid growth
Splitting off pieces of your role one-at-a-time
Business Hack: Finding a solid business coach
Alright. Let’s dive into each of those in more depth.
Scaling Service Delivery While Maintaining Quality
This is absolutely essential to growing a business, yet quite hard.
As you grow, you start to reach a point where you can’t be involved in everything that you once were. In the early days, you did everything.
You saw everything.
You knew every customer.
You knew every team member.
As you grow, that starts to change. You simply cannot be on top of everything and you have to let your team run and guide decisions.
The biggest solution here…
Building management structures.
When I say management structures, this includes several parts.
Here is what that looked like for me.
Management meetings to check-in with everyone on a weekly basis. Walk through accounts, challenges, roadblocks, hurdles, etc.
Management systems to keep an eye on key details. For us this has looked liked tracking certain KPI’s on each accounts such as:
Did we deliver the proper scope to every client this month?
If we failed to deliver we bring this conversation point to our management meeting to understand why we are off track.
What is the clients’ health status?
We use Green, Yellow, Red Light Statuses and track health. We have quantified definitions of each status. For example: Red Light means that we have had a client complaint, made a mistake on a clients account, failed to deliver on the scope, or have other issues or problems with the account.
Your management systems may look different, but you need some sort of system to check in with people.
No one wants to say they are not doing a good job. So if you just ask people “How’s it going?” They will always say great. You need quantitative data and ways to measure the key performance aspects of your business.
Recruiting and Hiring New Team Members to Execute the Work
When I started growing my business, I asked around to many entrepreneurs who were larger than me about what the biggest challenges are with growing a business.
HIRING.
Hands down. That is what everyone told me.
And they are right. But it’s not an unsolvable challenge. In fact, I would say that hiring has not been my biggest roadblock to business for the most part because I got this advice early.
The biggest mistake people make here are:
Not learning how to hire or recruit properly
Not thinking ahead and waiting until they are bursting from growth to start hiring. This leads to quick hires that end up not working out.
Every bad hire I made came from being in a desperate spot and not having enough applicants to choose from. I hired the best of my limited options who could start in my rushed timeline… and those were always what failed to work out.
A few tips to help overcome the HR hurdle
Get great at writing job descriptions - A lot of people don’t know how to write job posts. If you struggle, I recommend ChatGPT for this. I use this to write almost every job post now. But regardless here is the secret to a good job post.
“A job post should be a document you can refer back to evaluate if this hire did a good job or not.”
You define the role, the responsibilities, the skills they are required to have. You define their 90 day expectations and results. You define what they will achieve in their first year.
Then you evaluate every applicant against your job posting.
And then you evaluate them post hire against the criteria you set.
Get clear on what you want from this hire before you start interviewing people.
And use that job posting as a filter as you make your final hiring decision.
Hire HR Support
For myself, we were doing enough hiring that I could justify hiring a full time HR team member in the Philippines. This has been a huge unlock for me to have someone always recruiting and doing all of the heavy lifting.
If you can’t hire HR support, then I would also highly consider a recruiter.
Not all recruiters are great… there are certainly a lot of bad recruiters out there. But if you can find a good recruiter who can help you shortcut the hiring process significantly then it can be worth the time.
The alternative is that you learn to recruit and hire 100% on your own… which you can do. But it’s a lot of time investment and I question if this is the best use of your time as an entrepreneur.
Building or hiring leaders who can take ownership over part of a business (and letting go)
This obstacle really starts to hit as you pass the $1M-2M mark. Once a business gets to that size, you have to let go of more than just the execution… You have to let go of key functions of the business.
What part of the business every entrepreneur lets go of will differ based on your skillset.
For myself, I held on to Account Management the longest.
But I hired a COO to run operations.
I hired an HR lead to handle HR.
I hired a finance lead to handle payroll and finances.
I hired a strategist to handle reporting and analysis.
I hired a production manager to oversee all production operations.
This is more than just hiring someone to hand over part of the execution.
This phase involves giving someone ownership over a facet of the business.
When I say ownership, it means that they take your vision and leadership, but you trust them to run it on their own.
Maybe you do one-on-ones and coach them.
Maybe you collaborate and work with them at times.
But the key is that you get your hands out of that work… and you let someone else run it.
This is a HARD jump to make.
It involves a lot of self-confidence to let others lead.
It involves building up trust with your team members and slowly handing things over.
It involves growing into a CEO & Leader of your Organization instead of a chief doer.
Understanding Finances as the Numbers Get Bigger
A business doing $500k per year isn’t too financially complicated.
You have your salary + your costs.
The numbers aren’t too big. It’s easy to comprehend regardless of your financial skills.
Yet once you start pushing into $1M-2M+ in revenue things change.
Finances get more complicated.
Recommended reading for all entrepreneurs:
Simple Numbers, Straight Talk, Big Profits - Greg Crabtree
This is one of the best and most non-BS finance books I have ever read. Get it in print for, not audiobook as it is full of example financial statements.
This book helped me actually understand business finances at a deep level.
Management Costs
You now probably have “Management Costs” which are team members who may not be generating direct revenue, but are key to the operation.
For example, hiring a COO is a huge unlock to growing the business, but the costs are notable and in no way drive direct revenue.
Struggle to manage costs
Another challenge is simply the struggle to manage so many costs as you grow.
It’s possible that rouge SaaS subscriptions can be left on.
You may accidentally overpay people or make accounting errors.
You start having so many various costs that your books get more complicated beyond the original small business you once were.
You start making decisions to purchase annual licenses instead of monthly for cost savings which can create large lumpy annual expenses.
All of these things compound into a much more challenging financial machine.
The accounting work grows
For years, I did accounting work on my own. I had a bookkeeper but it was not too hard. There were not too many transactions and I had the time to spend time each month double checking and cleaning those up.
As you grow, it’s more transactions, more people, more expense categories, more complications.
You start needing to have both accrual and cash accounting.
And everything gets more complicated…
I held on to the accounting for way longer than I should have until I could no longer run the system…
Then my first finance hire failed…
And my second finance hire failed…
And my third finance hire failed…
And finally the fourth got me to a good place with finances.
This was a LONG 9 month journey of financial chaos and not having clear visibility into the numbers.
I was spending 1 full day per month just doing all of the finances myself for a period of time because I was burned so badly by poor finance hires.
In retrospect, I should have given all of these finance hires a quick test project to make sure they were a right fit before I ramped them up… That’s my key takeaway here. For tactical roles like this, test their work before you make the hire.
Rapid Growth Can Create Cash Flow Problems
Probably one of the biggest struggles that I hit was the fact that growth for us meant bigger enterprise accounts.
This meant bigger deal sizes, but often horrible payment terms.
Suddenly I found myself starting at an Accounts Receivable number of $350k+ and hardly any cash in the bank…
While the business was very healthy on an accrual basis, I had not built up the cash reserves to handle this rapid amount of growth.
Companies bullied us into 90 day payment terms which meant we had to pay money out of pocket and waiting 3 months to get paid.
One account wasn’t bad. But once you multiply this across over 50% of your revenue… it becomes a serious cash challenge.
The solution is simple… Build a cash reserve so you can weather any growing pains.
Being in a stronger cash spot also would have put us in a better position to make a few strategic acquisitions at points.
The cash that I did have, we used to invest into and built up ListenNetwork.co which is our new sister company that is focused on driving podcast growth through advertising.
Cash is king.
And having cash as you are growing is invaluable.
Opportunities will present themselves as you grow, and cash enables you to take those opportunities with confidence.
Splitting off pieces of your role, one-at-a-time
The finale weird part of growing is splitting off pieces of your role one at a time.
In the early days, I did just about everything in Content Allies. I did almost all of the work other than the actual audio production & design itself.
But I was project managing, handling client calls, client reporting, invoicing, etc.
As you grow, you look at all of the work on your plate and you slice off roles…
I hired a project manager.
I hired a sales person.
I hired a COO.
I hired an HR specialist.
At one point, I did all of those hires roles… yet as we grow that becomes unmanageable.
Knowing what part of your role to slice off, and when to make the hire is a key challenge of growing a business.
There is no formula.
It’s often a very personal choice.
The biggest way I look at this is:
What drains me?
What does the business need?
What can we afford?
Sometimes I have work on my plate that drains me… but there isn’t enough of it to warrant a full time hire.
Sometimes I have work on my plate that drains me… but making that hire means cutting my personal salary to a point that I am not ok with.
These are all decisions you have to make.
And back to our previous point, having excess cash makes all of these decisions easier.
Build a plan and vision for where you are going & execute it
As you start to hit momentum in your business, you will begin to see a vision for what this could become… get clear on that vision.
Define what it will look like.
How many team members will you have at $1M, 2M, 3M in revenue?
What key functions will you need to reach those levels?
If you have not read it, read Traction by Gino Wickman. I use EOS and highly recommend it. A great system for building and driving your long-term vision.
Business Hack: Find a legitimate business coach
This is what comes to mind as the challenges I saw with growing. You will likely face these and many more.
Throughout all of this I have retained a business coach to help me navigate these challenges.
I cannot recommend this enough.
And I’m not offering business coaching services… this is just an honest recommendation.
My criteria for a business coach is: Someone who has done something pretty darn close to what I want to do.
If I want to build a multi-million dollar agency, then I want to hire someone who has done just that.
If I wanted to build a million dollar software product, then I would hire someone who has built a million dollar software product.
Don’t get caught up in the world of coaching crap out there. Find someone who has done what you want to do, or something close, and hire them as a coach.
My current coach did not build an agency, but did built an IT company to $10M+ per year in annual revenue. His experience is close enough. While he can’t speak to industry trends, he can coach extremely well on growing a business.
In summary
Growing a business is a VERY different than starting one.
If you are hitting this phase… get ready.
Hopefully this post helps you in your journey.