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As a founder, I spent my fair share of years starting companies, growing them to a certain point and getting stuck.
We kept hitting the invisible growth barrier.
I sold my companies, but I never quite achieved my dream sale. It wasn’t until my third company that I figured out how to go from $1 million to $2 million (and then keep going).
Every business goes through some very predictable stages.
You start off with your business partner or first employee, and maybe a client or two. Your charisma and sheer force of will get you to $1 million in annual sales. This is the first break point. It’s almost a rest stop; you regain your balance, reevaluate your surroundings, make some brave (expensive) hiring decisions, take a deep breath and push forward.
Related: You Cannot Cut Your Way to Growth
Sometimes businesses fail at this point. In fact, it can take a long time to get past the plateau that hits at your first million. There are several factors at play.
You may simply have hit the demand limit for your product or service, and you may need to redesign it to suit a broader audience. In my earliest businesses, I could find a dozen clients who would pay under a hundred grand for a website, but couldn’t find very many that would pay double that without a significant increase in sophistication.
This meant retraining our team and coming up with higher value products.
It requires a big change in the way you do business — hiring, training, management, project management, quality assurance, account management and sales.
When your business is turning over around a million, you might have ten or a dozen people on your team. You’re all super-aware of what’s going on. You will work nights to get a big order out or prepare for a big pitch. You read each other’s minds and jump in to help. To some degree, you are all capable of doing each other’s jobs in a pinch.
North of this first million, and it starts to become important that you have specialists, and sometimes specialist teams. That means new management and new processes. Sometimes you will find there is an inner circle (the original team) and everyone else.
Caliber of staff
At this stage of growth, you begin to need more experienced staff to manage teams and bring in workflows and practices that they have seen work well elsewhere. In other words, you need more senior people.
Except you can’t afford the really experienced ones yet. Up to the first million, you were training great people you worked well with to deliver what was in your head. Now, you need to hire people with expertise. They are expensive. Perhaps you need to do without a few junior staff. Or sacrifice your own salary. Or give away shares.
This is where it gets seriously frustrating. It’s not so much that you come unstuck, it’s the opposite. You grind to a halt. You stall. Your business just stops growing.
Related: Why Employees Are an Entrepreneur’s Best Investment
It is utterly predictable, but only after you’ve seen it from the other side a number of times. I had six companies of my own and was then CEO of a group. I taught MBAs. Then I created a growth-acceleration program that’s now gone global. So I’ve seen exactly what happens at each business plateau.
The one that happens at around two million can be particularly disheartening. As I said, it took me three attempts (and ten years) to figure it out. Stressful? Check. Frustrating? Check. Depressing? Hell yes, and not just for me. Everyone I see gets to this point, gets stuck, can even start going backwards. Your own morale takes a hit, and no matter how much of a brave face you put on it, your team knows. Your best team member reads the writing on the wall and gets a better job with a bigger competitor.
So how do you break through the growth barrier?
If you look at it as a chance to take a breath, some things become obvious.
The first is that what got you here is unlikely to get you to four, five or ten million. It’s a very different version of what happened at a million. You need to redesign some important things. You need scalable processes, covering things like marketing, delivery, customer retention and hiring — things that can work really well even when they are delegated.
To scale, you will need new processes. You need smarter tools so your smartest people can focus on growth, not handling repetitive tasks.
Yet change is really hard to enact, especially from the inside. Your senior people have spent the past couple of years accelerating from your million-dollar pit stop. They have built great processes, relationships, sometimes fiefdoms. It is incredibly difficult for them as individuals to ditch what has worked so far and create brand new, untested, scalable processes. They will be reluctant to mess with the status quo.
And this is why you are stuck: You cannot grow because you are optimized for the level you are at.
The only way to do it reliably is to use a systematic approach and involve the people who are going to be the future of the business.
At 2Y3X, the frameworks we use are based on the work of Edwin Locke (goal-setting theory), Kaplan and Norton (Balanced Scorecard) and others. I wrote a book about it — Scale at Speed — which sets out in detail all of the individual tasks and best practice processes.
It’s going to require you to get your most important people involved. And by that I don’t mean your most senior people — many of them have entrenched interests and do not want anything to change.
But change you must.
Assemble a team called the “Growth Lab Team.” They are your future stars, people who really fit your values, who want to see progress and can envisage a stellar future. You will work with them to define your goals. We work with three-year goals, usually something like “triple revenue.” Then, work backwards from the end of the third year and figure out what you will need to be doing during year three.
Then, you take another step back and look at what you will need to do in year two to be prepared for year three. Finally, you look at the coming year. What do you need to change, design or implement today?
We break this down into different focus areas, and we make each task manageably deliverable in a quarter. For example, sorting out reliable inbound marketing will take three months. So will developing a system to keep every single employee on track and 100% effective. And so on.
Related: How to Grow Your Company Without Losing Its Culture
As an entrepreneur, you have been successful in starting a company — in surviving, creating products and services clients are willing to pay for, and building a team that really wants to do good work.
What isn’t so easy is taking this amazing business platform and growing it to the point where you can make a fantastic sale and realize your dreams. The secret is that you just need to look at it from a different perspective. Realize that there are stages, and that you need to change at each stage.
What will the result be? Well, in my case, it would have saved ten years, and I would have been seriously successful much, much faster.