How to Overcome the Unique Challenges of Emerging Businesses

08.14.17

Todd Schrock, Advisor with the CEO Advantage

This is the 10th and final article in a series on How to Overcome the Unique Challenges of Emerging Businesses (20-100 Employees)

Summary: The 3 Deadly Distractions

How do you, as the CEO of a 20-100 employee company, crack the code on the potentially disastrous distractions identified in articles #2-5 in this series? How can you counteract?

First, let’s review these deadly distractions for emerging stage businesses, showing the similarity among the solutions that each requires.

Article #5 explained the dangers of unsustainable growth. The growth in the number of employees, and the even greater growth in complexity, is a serious problem to solve. But the havoc created by this increased complexity also impacts the first two deadly distractions: Wrong Customers and Cash Crises.

And, as that article explained, the solution for all three deadly distractions is to build the right processes (and coordinate them throughout the company) to successfully resolve:

Wrong Customers—you need a simple strategy execution process to sharpen (and continually refine) a unique value proposition.
Cash Crises—you need a regular financial visibility process to sustain a cash-flow positive, profitable company.
Unsustainable Growth—you need a straightforward problem-solving process to tame the ever-increasing complexity.

Second, here is a quick refresh of the three deadly distractions:

Deadly Distraction #1—Wrong Customers

Wrong customers are expensive. Costs include:

Reduced margins
Increased customer support costs
No free word-of-mouth advertising by satisfied customers because the perception of value received is much lower than for other customers
Less opportunity to better serve loyal customers, ecstatic about the value you provide
Less time to figure out non-customers who are like your loyal customers

Increase your understanding of loyal customers. Better understand your company’s unique strengths from their perspective. Sharpen your value proposition from what you learn about both.

Repeatedly test and revise your value proposition until it is successful. Once successful, get a head start on a key midsize business issue: find a way to deliver this value proposition in a way that is unique from your direct competitors.

All of this, for an emerging business, is best done with the multiple perspectives of your entire leadership team, employing a simple strategy execution process that will continually sharpen this unique value proposition.

Could Your Customers Be Driving You to Distraction?

Deadly Distraction #2—Cash Crises

Thriving, or at times just surviving, requires avoiding the typical cash crises of the emerging business stage. You cannot pay bills with profit.

Cash is king at every successive business stage, though differently for each.

All three of the deadly distractions of the emerging stage are related to continued cash crises. Growth sucks up cash. Wrong customers waste time and opportunity—and cash. Underdeveloped processes in key areas obscure the onset of the next cash crisis. Financial acumen in the organization often is not yet equal to the challenge.

Build the right financial team and a regular financial visibility process to manage cash better. Use both to organize the entire company in a daily fight to turn every transaction into a positive cash outcome.

Starting with your leadership team, make sure your whole company learns these four critical cash truths:

Profit does not equal cash-flow.
Credit is not capital.
Growth sucks cash.
Cash provides entrepreneurial cushion.

Avoid Cash Crises…

Growing Broke? How Is That Even Possible?

Four Cold, Hard Truths You Need to Know about Cash

Deadly Distraction #3 – Unsustainable Growth

Revenue growth is good…and bad.

Understand the downside of growth: it creates complexity. And complexity increases much faster than the growth in revenues or employees.
Recognize normal growth (7-8% or less) versus fast (20+%) or explosive (50+%) growth, so you understand the speed of problem-solving you require.
Tame the complexity, otherwise wheels start popping off around the company at the worst times. Problems can then ripple throughout the organization. Crisis management becomes the rule of the day.

Slow down to speed up. Downshift the race car to get more traction.

Build a straightforward problem-solving process to engage the experience and strengths of every person in the company. You need this process to help you sprint faster than your growth, solving problems faster than they are being created.

Before Your Company’s Wheels Fall Off

Before your Company’s Wheels Fall Off HYPERLINK

Summary: The 3 Leadership Opportunities

Creating the right process for each of the three deadly distractions is not enough for a CEO of an emerging stage (20-100 employees) business. You must also lead your people to maximize those processes.

This leadership task involves a few upfront decisions, as well as many ongoing action steps. There are also critical disciplines and habits to improve so that your company’s leadership can succeed, whether you desire a sustainable and profitable company of this size or want to grow further into a midsize business.

Leadership Opportunity #1 – Build an Effective Leadership Team

Execution at this stage is now a team sport. Build an effective Leadership Team.

Execution is getting the right things done. The best small companies proactively execute simple plans to achieve priorities and hit the necessary financial results. Successful emerging-stage companies of 20-100 employees must do this as well.

The difference: execution must now be more broadly based than just in the Founder-CEO’s personal energy and presence. It must be based upon an effective leadership team, which can root the habits and disciplines of group execution into the entire organization.

That leadership team must align and organize the whole company through each departmental team to every employee.

(What happens when the Founder-CEO cannot effectively learn to delegate, accomplishing results through one to two layers of teams? Then the management style never gets beyond the frustrating genius-with-a-crowd-of-helpers model, which leads to under-developed and unfulfilled employees.)

Vision without Execution Is Hallucination

Leadership Opportunity #2 – Capture the Best of Both Leadership Mindsets: Entrepreneurial and Managerial

Recognize the leadership strengths of both the entrepreneurial mindset and the managerial mindset. (They both differ from a technician/craftsman mindset. A person may be a mix of several of these mindsets.)

Entrepreneurs of all personality types start and grow companies. Somesucceed. Managers organize and coordinate a company to profitably serve customers. Some succeed.

The entrepreneurial mindset sees opportunity, remains comfortable taking risks, and instinctively innovates. Move. Change. Grow. Energy! Unprofitable chaos?

The managerial mindset organizes, creates (and maintains) processes for coordination, and ensures sustainable profit-making. Organize. Routinize. Control. Order! bureaucratic paralysis?

Do not let the natural friction from these two mindsets divide, annoy, or paralyze your team. Leverage the best of both, aiming for the most effective mix at each stage.

However, because start-up and small companies require a super-dose of entrepreneurial energy to overcome difficult odds, the emerging-stage business often is most notable for the desperate need for balance created by adding concentrated doses of managerial skill.

Edison: Entrepreneurial Success or CEO Failure?

Leadership Opportunity #3 – The Founding Entrepreneur’s Most Difficult Decision

There is one decision for sustainable success that only the Founder/Owner can make. And this is the stage where it typically must be made.

The first two leadership opportunities (build a great leadership team and capture the benefit of both entrepreneurial and managerial mindsets) will logically lead you to the third opportunity. It starts with an introspective question:

“Where can I contribute?”

The question is simple. To think it through well is rarely so.

Start with a gut-honest appraisal of the company’s needs at this stage and of your strengths. Work to your strengths and use other’s strengths in areas where you are not strong.

Founding entrepreneurs have successfully filled many different work options within the company, including Founder-Owner, CEO, VP of a department, R&D specialist, etc. (Sometimes they already know they want to sell the business and start a new company.)

Don’t shy from the hard thinking. Get advice. Make a choice.

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08.14.17