I’m unpacking my “desk box” in our first real office -- an executive office space -- and a vague anxiety grows stronger. It is 1991 and my company, Product Data Integration Technologies, was growing rapidly -- within just a few short years we would make the Inc. 500 -- and I felt like something big and ominous was stalking me. I told my partners, “I feel like there is a shark following us around, ready to eat us if we slow down!” They looked at me like I had three heads and laughed.
When it was just a few of us doing and teaching database design, all we needed was to pay the mortgage and have some money left for food and wine. With our fixed costs close to zero, we were like a small sailboat with a huge sail -- the slightest breeze of revenue drove us forward like a speedboat. A classic bootstrap, we started in my partners’ guest house. Our puny 18” x 24” whiteboard represented a major purchase.
But we had just sailed into deeper waters. There were five of us to feed now -- and two more on the way -- plus a $2,500 per month rent payment, new computers and other expenses. That’s the shark. One of my many hats was CFO, and I lived in constant calculation of receivables needed by payday and the new biz pipeline that would keep the money flowing. From what I could tell, the shark was very happy that we moved to the new office because it was more likely that we would become its next meal.
Business went well for the next few years, but the shark grew as we did -- from a tiny surf shark to a Great White. The ominous feeling really intensified as our staff reached 60 people. With 85 percent of revenues going to payroll, you could reach back and touch the shark’s teeth at times.
Ultimately, we survived, selling to a software company in 2000. Both I and the shark moved on. Today, in my new startup, we have about five people. So when the shark swam by -- and I wasn’t surprised or all that scared -- I realized that I had become a better entrepreneur through what he taught me.
The shark never sleeps.
I had fantasized that having my own company would mean more time off, less pressure and a calmer lifestyle. That didn’t happen. Instead, I became the meanest, freakiest micromanager I could ever imagine. My new boss (me) would even wake me in the middle of the night, pretty much every night. Sharks don’t sleep -- and you may not either.
The shark likes fatter companies.
Once you get to 30 people, it seems that the answer to every problem is to hire another manager. Even in creative businesses today, I often see one manager for every two or three employees. You’ll swim slower, dragging all those managers around. The shark smells all that high-paid meat and just swims faster.
Big sharks do more damage than small sharks.
Higher sales mean more delivery pressure and people. Missing a $25k payroll that’s mostly partner pay is very different from missing a $250k payroll where people’s mortgages, tuition payments, hospital bills and more depend on it.
It’s rare to leave the shark behind, let alone kill it; especially in a service business. But as in nature, the shark is a vital part of the entrepreneurial ecosystem. The shark actually made mine a stronger company. I learned to swim both faster and better. One of the key tenets that I share with other CEOs is that growing your sales often just grows the shark. You won’t widen the gap between you and him by just selling more, but you can by managing smarter.
Grow your current customers.
Many companies make the mistake of chasing the shiny metal object of “net-new” growth -- new clients and/or new services. That can cost you current customers; and sharks smell that blood a mile away. Deepen the relationships you have; they are the best platform for growing your services.
Stop promoting your best.
It’s easy to confuse reward with promotion, and promote a top performer into management. That’s like turning the team’s best swimmer into a coach or cheerleader. It makes the team slower, as a body of business research has validated. The new coach has no time to swim, and no training for management. Chaos erupts. The shark is drawn to your thrashing in the water.
Teach them all to swim like you.
You’re a natural self-starter -- motivated and reaching for challenge and responsibility. It’s a safe bet that all your people have that in them too. That’s why they’re working for your startup. Channel their inner entrepreneurs. When you feel the need to hire a manager just to make sure that client status reports go out on time, ask if someone wouldn’t mind just owning that and making sure it gets done.
The laws of natural selection apply in business much as in nature. The shark helps to keep healthy companies focused. By taking fat, slow companies out of the market, it helps leaner, self-managing teams learn to swim faster, gaining on their own momentum. As long as you keep your team in shape and remain focused, you can swim with the shark forever. In the end, it will make you a better entrepreneur.