Are You Trying To Grow Your Startup Too Fast?
Every startup begins with the dream of becoming widely successful. The majority of startups will never reach the growth stage. Most businesses fail because of bad planning, poor execution and often times, distraction.
Many entrepreneurs make the mistake of counting their success either by their revenue or by the number of people they are employing. It’s easy to skip ahead in your planning if the first part of your plan has started to turn over significant revenue. This is often the pivot that leads to destruction.
A number of years ago, I became an intrapreneur for a bit. I was having a hard time coming up with a new idea, so I reached out to on one of my contacts and took a consulting job.
Consulting confirmed a lot of suspicions I had about the corporate world. The CEO was the only person I reported to. This position allowed me to be in a place of trust for the entire executive team and board of directors.
The company had existed for a few decades and had experienced varying levels of successes. It bought a number up startups along the way and incubated them. One of the biggest problems with the company was there were too many of these small incubators to fund.
I learned very quickly that public companies view money differently than a small business. It only took a few months to realize why this company had been buying all of these startups and why they were “dying on the vine”.
I was brought on to try and monetize something very specific and very impossible. It was the “holy grail” to this company — the upside potential was huge — but to monetize it in an ethical and legal way was impossible. I eventually shifted to analyze the problems in the functioning business units.
It definitely was not “Business 101”. Case studies are much easier to solve than problems with business units that have been around as long as the company.
The company had dozens of people try to revive it over the years. As a result, there were valuable parts littered all over the place. There were massive opportunities to increase revenue, but the suggestion of correcting course was always trumped by the potential gold mine tied up in “the holy grail”.
Every meeting we had about the “holy grail” ended with no budget allocation. Even though the surface reason for me being there was to fix an unfixable problem — funding concerns would send me into different divisions of the company to try and find opportunities not yet explored.
There were 5 distinct divisions within the company. All of them were remnants of previous acquisitions. Very few of them had a founder or original team member that had stayed on.
Many of these divisions shared a common theme — each of them could have operated on their own — successfully — if it wasn’t for bad decisions. The purpose of buying these units was to amalgamate them into something bigger. Unfortunately, due to a lack of execution, many of these business units continued to operate on their own — but paid all of their revenue to the parent company. I lobbied for funds on behalf of some of these divisions — but they continued to be starved despite profitability.
I ended up saving a bunch of money by helping to cut down some of these divisions. One of them, in particular, was suffering from a bad reputation and a frustrated workforce that was so tired with the company they became apathetic. It’s hard to turnaround mismanagement when people have taken it personally — but it is not impossible. Rather than take the time to rebuild trust we “packaged them off”.
The point of the layoffs was to use the salary saved to hired more appropriate people for the new demands of the company. We were overpaying people to make phone calls when there were more competent customer service people who could leave the sales team available to grow the business.
I worked with their HR, I had stacks of resumes, I even started calling people in for interviews — then the plug was pulled. We had eliminated hundreds of thousands in salary in a few weeks.
When I agreed to consult I was excited to interact with the employees — but more than that I wanted to work with the CEO. I knew him fairly well — but I wanted to see how a guy with an MBA solves problems. As it turns out, even the most experienced managers with the best educations are unable to split focus. It was impossible for him to focus on all the divisions while satisfying the shareholders and the board. He could write business plans all day — sticking to them without letting revenue dictate his priorities was a whole other issue.
If they had eliminated all of their other divisions, including their in-house marketing and advertising as well as their IT and other support divisions — and focused solely on the one project in front of them, they might have stood a chance. The reality was, the pressure was to grow all aspects of the business. The reason why this failed was the plan was cheap — it could be changed on a whim.
Consulting for “Corporate America” taught me that what I do as a small business is right. I’m not attached to anything. If a section of my plan or division of my company doesn’t work out after execution — I can drop it. With no shareholders to answer to and no need for board meetings that seem to never end, the small business has some major advantages over major corporations.
Small business gives an entrepreneur the possibility to build out concepts that big corporations don’t have the flexibility to try. A small business can take far greater risks and can change quicker and easier with less damage to their brand than big business. Being a small business can be a pigeonhole — but its one you want. If your business is clearly defined, with a real path to money, and if you’ve created a culture your employees enjoy — you have likely created something that big corporations spend tens of millions trying to buy. Don’t be discouraged small start-up, slowly grow your business and if you do choose to sell — make sure it’s to a company that isn’t going to abandon your project.
Are You Trying To Grow Your Startup Too Fast?
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