The 5 Rules That Will Guide Your Growth As An Entrepreneurial Business
You're reading Entrepreneur South Africa, an international franchise of Entrepreneur Media.If you’ve followed my writing, you will know that I have an allergic reaction to the term ‘SME’ and almost go into anaphylaxis at the term ‘SMME’ – particularly when it comes to government policy.
The issues and challenges faced by a small business are significantly dissimilar to those of a medium-sized business and equally to those of a micro-business.
The idea that a single government SMME policy could effectively service the challenges of these three – very distinct – types of businesses is beyond my comprehension.
And so, governments across the globe continue to be baffled that their beautifully constructed policy documents with equally beautiful graphics have absolutely no impact on the constituencies at which they are aimed.
It is not only governments, though, that get this wrong. We, as entrepreneurs, are equally guilty of confusing the operating rules of different sized businesses.
Entrepreneurs who start their businesses from scratch are all too aware of the incredible difficulty of moving their businesses from one state to another using the same rules, modus operandi and approaches when they’re a small business as when they’re a medium-sized business.
Below are five elements entrepreneurs need to consider as they grow from one stage to the next.
1. Your Skill as a Leader
The type of leader you need to be for a start-up business is significantly different to the leader you need to be for a 100-person-strong organisation.
Your leadership style needs to evolve on a continuous basis depending on the business’s stage of growth, and you need to consciously change gears from stage to stage.
From a practical point of view, it’s impossible for you to develop the same levels of intimacy in a 100-person business as you would in a three-person one.
In a three-person organisation, there is a level of intimacy that allows the entrepreneur to build close relationships with their staff; they know their spouses, their idiosyncrasies, etc. Many of the employees in this sized business are motivated to work in such an environment because of those levels of intimacy and the quick response times.
As the organisation grows and evolves, the entrepreneur must employ managers to whom most of the employees report. This creates a distance between the entrepreneur, as the head of the organisation, and those below the managers.
The biggest challenge in this new type of leadership structure is for entrepreneurs to let go of their previous direct reports and trust that the management will lead and mange those people as well – if not better – than themselves.
By the time the organisation has developed into a 150-strong team, the entrepreneur’s leadership has become much more generic. He or she still has to lead all the employees effectively but without having the close-knit relationships of the earlier stages.
The entrepreneur’s intimate relationships are generally now with the leadership level – one or two levels below – as well as with staff who have a long history in the organisation and the odd chance relationship.
Leadership of leaders is therefore an extremely important skill to develop.
2. Marketing That Matches Your Growth Cycle
Many start-up entrepreneurs erroneously believe that building their brands is the priority marketing activity when they start. As a result, they throw huge amounts of precious money and time at ‘getting their name out there’. It’s like a drop of rain in the ocean. It may be wonderful for their egos but generally does nothing for their sales.
A better strategy for the small start-up business is to use their precious marketing budget for creating sales material, social media material and marketing material that most importantly has a direct call to action.
Show the average 30-year-old an icon of an apple with a bite out of it and they will instantly recognise the Apple logo. If you did the same exercise in 1976, the year Apple was founded, no one would recognise the logo. Over time, marketing gradually evolves very deliberately from calls to action to more and more brand building and not the other way around.
3. Sales is the Founder’s Job
I strongly believe that the role of sales should always be in the domain of the organisation’s founder, no matter what the size. The small start-up business that immediately creates a sales team from which the entrepreneur has abdicated him- or herself is a sure-fire route to disaster.
Conversely, a business of 150 staff in which the entrepreneur is the only salesperson is also a disaster waiting to happen.
The role of the entrepreneur is to ensure that the sales structure evolves from stage to stage, building more and more sales competence within the organisation but never abdicating his or her relationship with sales.
4. Knowing When To Move From Tactics To Strategy
Let’s be honest, the strategy of most start-up businesses in the first phase is to just survive month-end. It really isn’t strategy; it’s tactics.
Days are spent navigating the learning curve, the rejections, the cash flow and the hope. It is only as the business moves to the next phase that entrepreneurs truly develop the mind-space to think a bit more long-term.
An entrepreneur who pontificates about market influences (the effects of the Venezuelan crisis on the oil price and the resultant impact on the input costs of his or her suppliers) is inappropriately matched to a start-up business.
The start-up is about the hustle, overcoming obstacles and grabbing fortuitous, unforeseen opportunities. On the other side of the coin, a leader of a 150-person strong organisation who is not considering the macro context and the opportunities and threats that it presents is inappropriately placed as the right leader.
5. Accessing Growth Finance
A final area that is important to consider is finance. Early stage businesses are obsessed with building their income statements, driving sales, ensuring the cost of sales is constantly being squeezed and fanatically keeping expenses down.
Cash flow is king and net profit is queen. As the business grows, the focus of the entrepreneur must move towards building the balance sheet so it can be leveraged to raise funding for new growth.
Strategic decisions are more a function of the balance sheet than of the income statement. This is a completely different mind-set and one that is critical for entrepreneurs to develop on their journeys of growth.
Pulling it All Together
There are obviously many exceptions to the above elements. Some entrepreneurs are balance-sheet focused, think on a macro scale, lead immediately through others, successfully develop their brands and quickly build a salesforce. In my experience, though, these entrepreneurs are rare.
They are generally entrepreneurial veterans with prior experience and have evolved a confidence and competence that has not yet been developed in their less experienced counterparts.However, most start-up entrepreneurs are not veterans and the bottom line is that, as your micro business grows into a small business and beyond, you too need to evolve and keep adapting your approach and strategy timeously and seamlessly.