What You Need To Know About Mature Companies Suddenly Revisiting Startup

Throughout their history, organizations progress through various phases and stages of the business cycle. What needs to be more widely understood is that they repeat just like the Economic Cycle. The founders or their successors find themselves experiencing emotions or behaviors that they do not expect to see. This article addresses the experience of an organization either completely going through or having important operations and investments going through the Next Era Startup phase.

The feeling stages within the return to the Next Era Startup phase are the same. They will go through feelings of butterflies, impatience, anxiety, and confidence and transition to a new business and leadership capabilities phase. We delve into the distinct behaviors exhibited and the actionable strategies required to progress seamlessly.

Organizations often transition into Middle Market businesses through other tipping points from Lower, Middle, and Upper Middle Markets. The National Center for The Middle Market defines the middle market as $10 million to $1 billion, with a Lower $10 million to $50 million, Middle $50 million to $150 million, and Upper as $150 million – $1 billion. Most of the nearly 200,000 Middle Market businesses fall in the Lower Middle Market classification.

The 'Butterflies' Phase (Take Two): Trepidation Mixed with Eagerness for Expansion

Signature Behaviors

A further iteration of the butterflies phase often occurs as a small business has survived the often-brutal transition into a middle market business. Its success drives the desire for new growth opportunities to support its established business and markets. Here, the management focuses on the bigger picture, contemplates strategic partnerships, and pursues expansion opportunities. As they enter this stage, the new opportunities create excitement and ‘butterflies’ and how they could achieve their now often bigger vision. A renewed focus returns and eagerness to grow, remembering the stall experienced during the last transition.

Decision Making

There is a bias toward maintaining momentum, quickly acting, and rushing to implement the next growth phase. While a business should be proud of achievements made, leadership is often hungry for further growth. This time around, there is initially a feeling of invulnerability; after all, entering the middle market is a significant feat.

Actionable Steps for Progress

Overcoming the butterflies in this stage requires:

1. Set realistic expectations, as this phase’s skill and capability levels differ greatly from the previous.
2. The sales approach must often evolve as the clients are larger and more sophisticated.
3. Evaluate potential partnerships and collaborations in the context of mutual benefit and industry relevance.
4. Strengthen communication channels with existing customers, foster loyalty, and explore opportunities to upsell.

Example: Business Consulting Company

Business Consulting, a high-performing consulting firm, had grown significantly, and now larger clients were coming to them. The firm was confident and exploring what was next, excitedly opening offices in new cities. Its prior approaches to selling and leveraging local reputation were not having the same impact in these new markets.

The ‘Impatience’ Phase (Take Two): The Drive for Scaling Up

Signature Behaviors

The second iteration of the impatience phase sees seasoned enterprises pressing for success with their growth investments. Pressure continues those leading the expansion activities; some are recent hires in new locations and have underestimated the time and resources it will take or the introduction of a new product not garnering the speed of adoption by the current customers. As the business attempts various activities to gain the desired momentum, increasing risks get taken to get things on track to the planned timeline.

Decision Making

The tension builds between holding fast and quickly trying things to have traction. Attention becomes dispersed and scattered. Franticness develops, and the ball often gets dropped because the infrastructure to support the business is still lagging. Decisions start to slow as frustration with the lack of momentum compared to their expectations.

Actionable Steps for Progress

To effectively make progress at this phase, businesses should:

1. Develop a comprehensive growth blueprint that factors different adoption cycles.
2. Keep focused on the source activities to generate revenue.
3. Devote resources to optimizing sales processes and sales team capabilities and tools.

Example: Tech Solutions Company

Tech Solutions, a leading local IT service provider, realized that to significantly expand its market it would need to support additional cloud platforms. The expectation of doubling its revenue and having similar revenue per deal / customer as the traditional business. Frustration developed between the delivery and sales team about how long it was taking to get clients of similar size for this new service line without realizing that the service line was, in fact, a new business within the existing business.

The 'Anxiety' Phase (Take Two): Managing Risks and Doubts

Signature Behaviors

As with the first time around, the impatience phase develops into anxiousness for success. Fear that the growth venture might fail and concern such as whether the people driving it have the right capabilities develops.

Questioning whether it was the right city, product, or market occurs and why it has yet to succeed. Doubt increases about whether to send additional resources and whether they will send good after bad. Fears about damaging the company’s reputation and its success story build and concern about how competition will capitalize on the perceived failure.

Requests for discounts come from the sales team desperate to get some form of increase. Often the executives, the sales, and the marketing team widen their net into other markets; blame starts focusing on the product, marketing, or strategy as the cause of failure.

Approved budgeted spending often comes to its limits and requests further approval because prior spending is a sunk cost.

Decision Making

Decisions start to stall, pivots, reducing related expenses, and commitments are all considered, especially if the leadership needs to gain the experience or capability for launching the specific expansion investments in the recent past.

Decisions made at this time determine which path the growth investment takes. If the developing asset is good but resource-starved, it will stall and ultimately decline. If the investment was bad, it should be quickly closed to commence the next one. As the management team gains confidence, it will move to the next stage.

Actionable Steps for Progress

To navigate this anxiety, management should:

1. Review the business case for the expansion. Is the issue the strategy, the timing, and time expectations, or is it the team? Were the assumptions right and the expectations realistic?
2. Is the expansion a stretch? Jumping from a single office or location serving a state to opening up in a different country 5,000 miles away is, for many, high-risk.
3. Make sure that the business infrastructure can support the expansion.
4. Ensure the sales tools, process, and positioning are aligned for easy growth.
5. ‘Act as if,’ persevere, and keep focused. Set a deadline for the expansion to start gathering traction.
6. Manage the team’s stress levels and how they present themselves in front of the prospects. Ensure that they have support.
7. Embrace iterative learning and experimentation for self-assessment and risk mitigation.
8. Encourage cross-functional or cross-divisional collaboration and what concerns prevent them from succeeding.

Example: Specialized Manufacturing Company

The specialized engineering components manufacturer cautiously expanded into related industries through collaborations and joint ventures. This approach allowed them to harness their expertise for new markets without jeopardizing their core business. Even with this approach, they entered the ‘Anxious’ stage with each of these collaborations and joint ventures. Through their experience, they built a playbook to help future leaders and team members to educate and understand the critical reviews, assessments, and journey these will go on as they develop before they truly establish themselves, including when to withdraw from the initiative and how to do it without damaging the partner relationship.

The ‘Confidence’ Phase (Take Two): Sustaining Momentum Through Informed Decision-Making

Signature Behaviors

As the anxiousness of the prior stage wanes and confidence that the investments will work builds, the management team now considers how to develop and scale the growth expansion.

There can be some pressure from either the team or the management to recapture the growth perceived to have been missed as the growth investments took their time to mature. There is often a danger of short-termism.

Decision Making

What investments will create the desired growth can be sustained become the key decision discussions. Pressure by the team going through this phase for the first time often drives pressure to increase to gain significant profit, rewards, and bonuses.

Understanding what investments are required to support growth, revenue, and customer service is key.

These investments’ initial success can also strain the organization. Experienced operators understand that they need to review the organization for a while and understand what further investments are now made across the entire organization to sustain the now bigger business, its customers, staff, and facilities.

Actionable Steps for Progress

During this phase, businesses need to:

1. Plan ahead of the growth and work with other departments to understand the impact on their functions as the development gains momentum.
2. Grow or develop the organization to handle customer service as the next growth phase will cause some breakdowns.
3. Recognize and celebrate accomplishments, fuel motivation, and protect the culture.

Example: Logistics Company

As it expanded its locations and services within its network and became confident about its success in these investments, an international logistics and supply chain provider understood that it would need to create a significant investment in its core capacity and infrastructure. Further increases in delivery capacity would be able to use this core for a decade.

Conclusion

The business is now well established, and the founders are proud of the company it has become. They can revisit and be surprised by going through the experiences and feelings they associated with when they started the business or observing them in their team.

By getting ahead of the business cycle, experienced operators can put plans, measures, and support in place to manage the feelings of butterflies, impatience, anxiety, and confidence that they or their team will experience and their potential to send them off track by the surprise of feeling that way.

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by Adrian

From Lost To Proud: Mastering More Effective Business Growth

After successfully navigating the challenges of the Accelerated Growth phase, the business moves into the Future Growth phase. Firms in this phase are well-managed and have taken all the lessons the Accelerated Growth phase threw at them. The company is under control and the feeling ranges from proud to comfortable.

As with the prior blogs covering the previous phases and their component stages, we will delve into the associated behaviors, decision-making characteristics, and necessary actions to progress – the critical pieces for leaders looking to facilitate sustainable growth.

The management team at this phase is disciplined in their investments without overly stressing the organization. As the company business travels through this stage, it eventually comes a further tipping point that can take it into the next iteration of the Business Growth Cycle and a further Startup like phase as the company calibrates to a new level of commercial and organizational sophistication.

Proud: Success Hard Fought

Being proud in the context of the Future Growth phase refers to the stage of self-satisfaction derived from business success and the challenges that shaped it, the owners, and the management team to get here. It is now achieving targets, often exceeding expectations, and tackling major milestones. This peak of accomplishment can foster a positive organizational culture, boost motivation, and enhance a company’s reputation.

However, this feeling should be handled carefully. Overconfidence and pride can lead to complacency, arrogance, or reckless decision-making, potentially undoing hard-earned progress.

Businesses at this stage are the most valuable compared to others. Aligned buyers respect the management team’s achievement, and the business assets they have built that will drive future revenue.

Behavior: Confidence and Forward-looking

During this stage, the owner and management team are forward-looking. How can they continue to grow but in a well-managed manner?

The behaviors are confident, calm, and controlled or disciplined. They are effectively at a higher level than the Good Times and Relaxed stages of the Incremental Growth phase. This was imagined with the vision that led to the investment and the Accelerated Growth phase journey.

Having weathered the earlier stages of the Business Growth Cycle, companies at this stage possess an enhanced organizational capability and a clear comprehension of their growth drivers.

Decision Making: Reflective and Rational

A strong commercial context drives the decisions at the stage and with an understanding of the impact on Culture. The business grows and progresses to the next phase of scale.

Emphasis is on disciplined, measured growth, and as the business grows and continues, it reaches the final tipping point of the cycle where the leadership asks what’s next. Do they try and stay at this point or look to start the next growth cycle?

Decisions are made calmly, confidently, and implemented in a controlled manner. They understand the level of risk that they are willing to take and what they do not.

Companies that are clear about why they are doing things continually invest in staff training, operational efficiencies, new technology, and product innovation to spur further growth are the most successful and desirable.

Action to Progress

Some measures can be taken to move through this stage and phase successfully:

1. Understand the next generation of owners’ vision.
2. Prepare the Culture for future growth. If the organization doubled in headcount, how can it be managed and stay true to its intent?
3. Ensure that the skills are in place to support the next growth cycle.
4. Ensure that the management information, reporting, and decision-making can handle a doubling of revenue without breaking or being unnecessarily onerous or cumbersome.
5. Understand the business’s core assets and how it can further support its customer’s needs.
6. Explore whether entering new markets, channels, or territories and the skills, resources, and capital required to achieve it successfully without driving the main business into the Accelerated Growth phase again too quickly.

The fundamental mistake that can be made at this stage is ‘if it ain’t broke, don’t fix it.’ Counter-intuitively, this is a growth phase where purposeful improvement becomes critical.

Services Business

A successful services business successfully navigated the Accelerated Growth phase. Its Culture had matured, and strong profits returned. Its client base was growing, and the nature of the assignments was significantly more complex than five years prior. Their new opportunities came from different states, countries, and industries.

The problem in front of management was where to focus next. Servicing these clients successfully could mean their employees would spend significantly more time away from home, on planes, and be less productive.

Their first decision was to initially develop and evolve their product to deliver it with a strong remote element, embracing technology until it was essential to be in person.

The second decision was to build their internal training and mentoring so that they could scale and build a small number of key satellite offices. The technology allowed the local teams to still be in the room, observing, learning, and developing their skills from their mentors.

The third decision was to focus on managing Culture in a digital-first or high-digital delivery environment to stay true to their core values and the lack of personal connection and informal discussions that being out of immediate sight would create.

Conclusion

In conclusion, the mastery of the Future Growth phase symbolizes the success of perseverance and strategic adaptability. It’s a pause in the marathon, an opportunity for celebration, but it is not the endpoint. The challenge for businesses is to turn this culmination into a springboard for continual growth and innovation into the next iteration of the Business Growth Cycle.

With a vision in mind and strategy in place, the business landscape changes from being a battlefield to a chessboard. The moves, guided by the lessons learned from past experiences, prepare you for the shifts in the business landscape. Agility and foresight will be your pillars of success as you decide your next move: to remain in power or initiate the next cycle of growth. Either way, the guiding light remains resilience, readiness to adapt, and a commitment to a culture of continual learning and innovation.

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by Adrian

The Hidden Pitfalls In Accelerated Growth You'll Actually Experience

Following on from the tipping point at the Lottery stage of the Incremental Growth phase, the investments made drive the rapid expansion that creates the Accelerated Growth phase.

After the great feelings from the Relaxed and Lottery stages, the feelings felt during this rapid growth are primarily surprise, both good surprise and bad. Each section will delve into the associated behaviors, decision-making tendencies, and actions required for progression.

Frustrated: The First Surprise

The bill has come due. All investments previously deferred must now be paid.  The cash flow impact builds, and there is a change in feeling good from having increased revenue to feeling bad as now the company must bring in that revenue to pay the bills.

Pressure and frustration build! Revenue is rising quickly, but not quite as fast as planned. Some of the infrastructure is struggling, and some clients complain about their experience.

When the owner or leader arrives, a line of people is waiting to discuss issues which need resolution.

The frustration deepens as the challenges continue, and the business strain is often taken home.

The company is now starting to run the leadership more than they run the company.

Behavior: Failing Communication

The frustration leads to impatience, irritation, and a tendency to blame others. The communications tend to take on a different tone than during the last phase. The culture begins to turn, and a culture of control starts to germinate. This starts with the owner or leadership, quickly moving throughout the organization. New hires rapidly adopt this developing culture.

Collaboration reduces as team cohesion evaporates. The team focuses on what they must do to avoid being blamed.

Decision Making: Slows Down

In the face of frustration, decision-making starts as reactive and hasty, primarily to eliminate the line of upwardly delegated problems presenting themselves each day. Bigger decisions become ‘leave it with me’ or ‘I will get back to you,’ which becomes the order of the day unless a decision must be made immediately.

Unless it is broken and needs repair, decisions become delayed as there is seldom enough time, energy, or desire to evaluate the problem properly and make it. Confidence in the business and the team can be eroded.

Action to Progress:

To dampen the frustration and reduce its impact, leaders can:

1. Understand the business cycle and plan to get ahead of it.
2. Communicate with the team and explain the business cycle.
3. Acknowledge the impact of growth and the change it is forcing.
4. Agree on the expectations on how to manage this stage of the Accelerated Growth phase.
5. Reconnect to the vision.
6. Acknowledge the cultural impact and the behaviors that have developed.

Example: Manufacturing Business

A manufacturing company that continued to experience growing demand for a new product line faced frustration when its production facilities struggled to meet deadlines with high levels of substandard products.

The management team meetings became one large argument, with the sales manager blaming the delivery manager, who accused the production manager, and the production manager blaming the sales manager for unrealistic promises. The cycle went on day in and day out.

Stressed: Closed Doors

The stressed stage comes on the heels of being Frustrated. Growth continues either faster or slower than expected. The business continues to struggle with the impact. Frequently money is thrown at the problem of getting goods and services out to the customer or client.

Revenue continues to rise, yet profitability rapidly declines and often moves to loss. Staff are feeling overworked, working harder and less efficient.

Behavior: Heads Down, Doors Closed

During this stage of the Accelerated Growth phase, the behaviors initially exhibited in the Frustration stage amplify.

Employees continue to delegate decisions and issues upward. The owners and leaders feel like the whole world is pressing down on their shoulders, and loneliness sets in.

Blame continues and gets worse with decisions taking longer to be made, and meeting avoidance starts to develop. Employees keep their heads down and avoid interactions with the owner, not wanting to be chewed out. Where can people go into an office or a conference room and the door gets closed with the implication of do not disturb!

Sometimes, the owner or leadership tries to work from home to avoid all face-to-face interaction with the team.

Productivity and focus decrease, and things take an increasing amount of time. Customer promises are broken, customer issues continue, and staff sickness increases.

Decision Making: Avoided

The increasing stress levels contribute to analysis paralysis or general decision-making avoidance.

Decisions are often poor, and exacerbated by decreased focus and a negativity bias, remembering that the decisions to drive the current growth and revenue levels have not worked.

Individual leaders and employees are protecting and looking after themselves, avoiding anything that could come back and bite them and pushing nearly every decision to the ownership.

When decisions have been made and have not worked out exactly as people expected, blame and covering their backside is the order of the day. The owner and leadership often start taking tasks back as it is easier to do it themselves than handle all the hassles.

Action to Progress:

To manage the stress stage effectively, leaders need to:

1. Prioritize self-care, including exercise and sleep.
2. Stay connected to the business. There is a tendency to want to distance oneself from the company’s problems.
3. Understand that it is a stage of growth that can be managed through.
4. Reconnect to the ‘Why’ behind the vision and prepare for getting business through this period of significant change.
5. Review the organizational structure and what people are responsible for. Understand where overwork is, and where automation and transformation can relieve it.
6. Manage the urge to do it all.

Example: Manufacturing Business

Returning to the manufacturing business introduced in the Frustrated stage. The management team has moved to being stressed. Every member hated attending the daily meetings and came ready for the fight with evidence of the other team members’ failures.

When not in the meeting, they retreated into their offices, avoided phone calls, and asked for emails they could review or use to push a point. The sales manager occasionally went out with their salespeople to clients, often to take the heat for the issues of delayed delivery or mistakes. The response was typically to push an urgent order with an expectation of delivery the next day and pressure the owner to agree to push it through to save the customer regardless of what the production had planned and the delivery by courier.

Every day was stressful, and the management team had developed a pattern. The Production manager expected to get a customer urgent job. The owner could see that they were losing money on these orders but could not see how to address it after all these customers had helped them to grow and scale to this size.

Disillusioned: When Will This End

As the Stress increases, there is a point where the stage transitions to that of Disillusioned. The owner would happily sell the business if they could get a good price to relieve the Stress and pressure.

Business owners at this stage often ask, how did the business get here? 2 years ago, the business had made $15 million, with $2 million net profit, one year ago, it made $16 million and broke even. This year, it made $18 million, and has lost $1 million net.

Why aren’t people doing their jobs, always sick or leaving? Labor relations are poor, and why do accidents happen now?

The focus moves to reducing costs, considering if the team can do more, and occasionally responding to the many emails asking them if they are interested in selling.

Behavior: Head in Their Hands

The gap between the original expectations and reality continues to widen as the behavior has developed into cynicism, detachment, and a lack of enthusiasm. For some, a feeling of despair emerges.

Unless very urgent, decisions take six-plus months, if at all, to be made. The owner and leadership would do anything else other than make a decision. Sometimes they can be found fixing the printer, the first machine in the shop, or giving unsolicited advice on how to make something on the production line. This helps them feel like they are adding value to the business as the business feels like it is running them, and they have a sense of having to do it all themselves.

Staff leave, and the culture is initially negative but can quickly turn toxic if not addressed.

The behavior is completely reactionary and often likened to playing whack-a-mole. Communication is cautious and formal, often run through HR before sending.

Decision Making: Stalled

When disillusioned, leaders exhibit a pessimistic outlook and are highly risk averse and indecisive. They often look back to the Good Times or Relaxed stages, wishing they were back there.

There is also increasing pressure to grow further and to change. Concerned about making mistakes, the indecisiveness progresses them to the next stage: Research, where they look for utopian solutions to fix all the problems and challenges.

Action to Progress:

While this is a normal stage, the time the owners, leadership, and the business stay can be managed. In addition to the actions highlighted in the prior stages of the Accelerated Growth phase, management can:

1. Acknowledge the situation and mood inside the business without blame.
2. Redesign and implement the next phase of culture to the future of the business, its values, or how they are expressed and the behaviors underpinning them.
3. Manage the staff transition for those that do not want to change to the positive culture is implemented, and resistance is pushed through.
4. Look to restructure the business, what needs to be changed, what roles are no longer applicable, and what can be simplified and automated.

Example: Manufacturing Business

Returning to the manufacturing business introduced in the Frustrated stage. The management team has moved beyond stressed, to completely disillusioned. They are all looking for other jobs, but the management of the business has a toxic reputation. There was high turnover within the sales team, and sickouts were increasing with the delivery and production staff.

The business received lowball offers to buy them from their competitors, circling like a group of vultures.

The management team, faced with their reality, decided to stop arguing with each other and understand how they could work better together and bring the business back to life.

They agreed to get some help to help them work collaboratively again. After understanding what was driving each area of the business, they reset their context to change the expectations they set with their customers – the previous one was the speed of order to delivery, understanding that the production was about maximizing efficiency, and that meant that orders took longer than promised by the sale team. Finally, they worked with the delivery team to plan the routes more closely with the drivers’ operations.

This allowed them to enter the lost stage with a sense of accomplishment.

Lost: Research Stall

The Lost stage is so-called because the organization starts to do something about moving the business forward. As it enters disillusioned and starts looking for why the company is not working as it once did, it can get absorbed with research, similar to analysis paralysis. The leaders explore how to dig themselves out.

This research is not logical when conducted with Stress, disillusionment, and despair. It can appear to the staff that it is another of the owner's or leadership team's great ideas, like throwing mud against a wall.

This stage of the Accelerated Growth phase is a pivotal turning point as to whether the business will move into the Future Growth phase, the Plateau, or the company enters the Decline phase.

Behavior: Feeling Lost

As they enter this stage, the team often lacks clarity regarding future strategy and direction. They are working on the problem but focused on the day's issues. It is initially hard for them to recall what it was like to look toward and plan for the future as they did earlier.

Their behavior can be one of trial and error, hoping that they have found the solution and it will reignite the stalled business and get it back into profitability.

As the solution is understood, the lack of whacking moles daily can make the team feel lost as it had become an all-consuming behavior, and the larger the number of moles whacked, the more a sense of accomplishment was felt.

Decision Making: Trial and Error

Initially, decisions are mostly deferred at this stage, hoping the issues will resolve themselves.

Once the choice has been made to change the situation, research starts, but it is often from more emotive decisions that are made with the hope of solving the problem. As these fail, it can feel like there is a repeating cycle of trial and error as they address one specific issue at a time and have not addressed the causes of the many particular issues.

Action to Progress:

To regain a sense of direction, leaders can:

1. Reconnect to why the business was created and its importance to the founder.
2. Review the vision that drove the investments during the Lottery phase. Can it be achieved?
3. Review what organizational structure changes are required to achieve the planned growth and how many steps will it take.
4. Understand the organization’s capacity, where it has too much and where it has too little, and what it will be at the vision.
5. Assess the Management and Leadership capabilities and where they can be enhanced through training or where a gap needs recruitment.
6. If not addressed in prior stages, redesign, evolve, or realign the organizational culture and proactively manage it.

Example: Manufacturing Business

The team has become more comfortable with their agreements and a new working method. They no longer spend nearly all their time and energy dealing with the fallout and arguments between them.

Initially, they felt lost and a little uncomfortable. What would they do each day? Now having the energy to undertake further research to gain the market share they had expected before becoming completely internally focused.

By researching and building their plans from where they are, which they now know, they were able to see how they could achieve the vision that launched all the prior investments. They were able to build a plan that showed the sequence of steps required to build out the business’s capacity and fill it up without further stressing it or creating the bottlenecks that had previously existed.

Conclusion

The Accelerated Growth phase can be a roller coaster if the organization is well funded. For most, it can be an unpleasant experience as the organization changes. Not being aware of how this phase has the opposite impact to the last phase as the revenue grows has surprised many business owners and their leadership teams.

Leaders can forge a path toward continued success and growth by acknowledging, confronting, and getting ahead of these challenges so that they can quickly move through them as they can come up.

 

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by Adrian

How To Navigate The Surprisingly Awesome Stages Of Incremental Growth

In the world of business, growth is essential for long-term success. Every Company goes through different phases, each marked by specific feelings, behaviors, and decisions. This blog covers navigating Incremental Growth after the Startup phase.The Incremental Growth phase is characterized by steady progress and increasing opportunities.

After feeling confident and pushing forward with investments within the business, it now progresses into this phase. Four stages have unique feelings that entrepreneurs and executives commonly experience: feeling Stretched, Good Times, Relaxed, and the final element of this stage, feeling like they have won the Lottery. Each stage brings unique challenges and opportunities, influencing behavior, decision-making, and the actions required to navigate them successfully.

Stretched: Harnessing Discomfort for Growth

When a business enters the Stretched stage, it has typically made significant investments based on the confidence gained as they can see that the Company will succeed at the tipping point at the end of the Startup phase. These growth investments are about increasing the capacity of the business. Sometimes paying for them can be challenging. Others, it’s about keeping up with the demand with the limited resources available. The uncomfortable tension sometimes means that the ball gets dropped as the business grows but doesn’t have its processes and training solidified.

Behavior: Getting Everything Done

During the Stretched stage, a frantic feeling builds from trying to get everything done and ensuring enough revenue to pay for the investments and the increased costs. Innovations and automation where simple and low cost often arise from the need to do more with limited resources and find ways to grow operations effectively. This is a very different feeling, the frantic feeling as previously it was in hope, and now it is about keeping up with the business.

Decision Making: The Fear of Missing Out

Often feeling like there are too many plates to spin, some decisions get forgotten or dropped until they become urgent. Usually, there is a fear of missing out as opportunities present themselves, and there is a danger of committing to too many things at once, servicing too many customers.

Decision making is often quick, and frenetic, as the pace of events makes decision-makers feel like there is little time available to think things through. Business owners and leaders can easily over-stretch themselves in pursuit of growth and the desire to make up for the lack of revenue when they started the business.

Action to Progress:

To successfully navigate through this stage, several measures can be taken:

1. Understand the organizational capacity and how full it truly is. Build a capacity plan. The inefficiency of growth makes it easy to feel full when the organization is far from it.
2. Increase capacity as defined in the plan and work to make the existing capacity efficient.
3. Be clear on expectations and, if required, reset them. Don’t try to get to the lottery phase by over-investing or growing too quickly without the cash flow to underpin it.
4. Often a reality check is required, as well as slowing down and focusing the business and its resources on what can be done well.
5. It is being aware of the demands on the team and the frantic nature of how the leadership shows up for both the workplace and the customers.

Example: Manufacturing Company

A Manufacturing Company specializing in electronic components in an emerging market entered the Stretched stage after securing a significant contract with a new customer.

In attempts to meet the contract’s demands, the existing customers were slow-rolled, thinking they could settle things down shortly. Both the large new customer and the current customers because unhappy with the customer service, the quality of the goods made and the timeliness of the deliveries.

The Company realizing it was in danger of destroying the business it had built, worked through, and created a capacity plan and modeling and understood the further investments needed to be made and where efficiency in the manufacturing and the business operations required to be gained quickly.

Slowing existing sales activity down until it could confirm to the existing customers that honoring their commitments and expectations and breaking down the job roles to hire functional specialists was key.

Working with its customers to manage ongoing expectations and what it was doing to ensure supply allowed trust to be rebuilt.

Good Times: Relaxing into Predictability

As the team works through the Stretched stage, the feeling changes. Revenue steadily increases and is becoming predictable. Profits are reinvested into growth, and the business starts to feel like there is substance to it. During this stage, the firm has momentum, and the bills can be paid as cash flow is also predictable and feels planned. Some companies look to take out additional funding to support a steady increase in their capacity to meet predicted demand. The business starts to feel established.

Behavior: Building on Momentum and Confidence

During this stage of the Incremental Growth phase, the behavior observed is systematic spending on investments that make commercial sense. Some invest in more capacity, and others in ways to deliver more with the same. This behavior reflects a belief in their ability to capitalize on their success and ensure sustainable growth.

Investment blindspots are often linked to the infrastructure foundation of the business or the culture that is developing as the team grows.

Decision Making: Strategic Investments and Expansion

Most of the decisions focus on investments and expected returns. Data builds that allow some predictions of the returns rather than the guesses made in the Startup phase. Business owners and leaders evaluate opportunities carefully, weighing the potential risks and rewards. They may diversify their revenue streams by adding new products or services to the existing customer base. Some look to add new offices and facilities, assuming these will quickly come online and not follow their Startup phase. Typically, the first investment in branding and upgrading the marketing often occurs now to support the drive for steady incremental growth.

Action to Progress: Growth-oriented Investments

The key actions during this stage focus on investments:

1. Invest in increasing revenue capacity to the plan.
2. Ensure that infrastructure capacity is also being built to support the revenue; often, this is left until the infrastructure is highly stressed.
3. Define and manage the organizational culture and the behaviors now.
4. Review the team’s capability to where the business is going and be clear at what capacity level these skills will cause commercial and cultural issues.
5. Identify blindspots and plan the investments required and what the triggers are.

Example: Software Solutions Company

Software Solutions, a company specializing in implementing CRM solutions for its clients, entered the Good Times phase as acceptance of SaaS-based solutions. To capitalize on the market, it invested in increasing and training staff that could deliver its solutions to its clients and in technologies that automate and standardize the implementation methods and reduce the chance of human error.

Their investments allowed them to increase the number and speed a small team could implement a client’s configured system and data and move away from the industry headcount standards, recruitment challenges, and margins.

Relaxed: Pitching Bigger

The business now feels like it is in its stride. Investments have mostly paid off, and each month the Company has grown from the previous month.

At the Relaxed stage, the leader feels confident and as the name suggests, relaxed. Larger opportunities continue to present themselves, and the sales team can get appointments into their targets. The business is well-regarded in the industry, and the prior investments in brand and marketing are paying off.

Often the original vision is coming near to being achieved.

Behavior: Looking for Bigger Opportunities

Companies in the Relaxed phase tend to focus on ongoing operations, reinforcing what works well and finding ways to generate further efficiencies.

Sales are predictable. Everyone works well together and is glad to be associated with the business. At a later stage, staff typically lament and call this time the ‘good old days.’

As this stage progresses, it is common for a feeling of invulnerability to be experienced as it enters the lottery stage. Everything is good, and issues are occasional.

Decision Making: Planning For Growth

During this stage, there is often a decision-making focus change to maximize the owner’s income and return after all the years of sacrifice and hard work.

Returns and expectations drive decisions, with expectations of investments increasing in commercial impact and the time it will take to achieve that.

Structured bonuses, pay raises, promotions, and staff assessments are often introduced. Plans for ambitious growth and investment are usually formulated but not yet implemented.

Action to Progress: Look to the Future

The business can feel that it is working on automatic at this stage. The following are often implemented to move into the next phase successfully:

1. Reset the vision, especially if it was set during the Startup phase.
2. Keep looking beyond today into the bigger picture vision and what infrastructure, not just revenue investments, are required to sustain the business.
3. Moderately move the balance between equity (investments) to owner income.
4. Make measured investments rather than doubling down.
5. Adopt a monitor, adjust, and repeat discipline.

Example: Renewable Energy Company

Renewable Energy Solutions, a company specializing in solar panel installations, entered the Relaxed stage after establishing itself as a regional market leader for both quality of installation and customer service. After years of building the business from a roofing company, the owner wanted to start getting significant income as they planned their retirement.

The Company invested in technology and methods to reduce the time taken in the planning and engineering efforts required before installation to take advantage of the proposed tax incentives the government was planning to offer its taxpayers to move at least partly Solar. They further developed how an average house could be successfully installed in less time without jeopardizing its safety record and warranty claims. Thus achieve more installations with the existing team.

Lottery: Hitting it out of the Park

The Lottery stage is a tipping point that is described as feeling invincible. Revenue, related profits, and owner income keep coming. It feels like winning the Lottery; the business is a golden goose.

Very quickly, upgrades are made, both personally and in the business. These include new cars, office locations, decor, homes, holidays, private schools, etc.

Risks become larger and more significant. The business is highly vulnerable at this stage, with plans that are too complex or complicated for the team’s abilities can lead the Company to decline.

Behavior: Evaluating High-Risk Opportunities

What could go wrong? There is now so much cash that the vision is recast to a significantly bigger one. The owner and management team believe they are invulnerable, and they start to exhibit behaviors that focus on evaluating high-risk opportunities and balancing them against potential rewards. Incremental growth is now seen as too tame.

The team may also consider buying out smaller competitors to double or triple their revenue or even more.

Purchases now are typically the best, and the top model of the equipment, and the business undergoes a significant premises overhaul to show that the Company is successful.

For some, arrogance can kick in. After all, they have built a business that many would envy.

Decision Making: Making Bets

During this stage, the business management now considers what investment bets they can make and expect significant returns. Often they forget or were not around in the early stages of the business.

There is often a distorted and optimistic view of their ability to pull off the biggest growth investments and what it will take to make them successful.

Action to Progress: Will the Business Support the Growth?

The actions at this last stage of the Incremental Growth phase can feel counterintuitive:

1. Ensure that the infrastructure is in place to sustain the level of growth that the management team is planning.
2. Slow down the growth to ensure the business can handle the rate of change.
3. Build leadership and management capabilities inside the business to where the Company will be.
4. Understand and work ahead of the impact of the culture for the significant size shift.
5. Put the business management processes in place to run the business at the new level, identify where it will break, and understand why.

Example: Tech Solutions Company

Tech Solutions is a privately held custom software business specializing in leveraging machine learning and artificial intelligence developments available with the rapid rise in demand after many years of doing OK. They were presented with a major opportunity to acquire a competitor whose founder had fallen sick. While the chance held significant potential, it also carried substantial commercial and technological risks, including integrating two technology platforms and potential customer overlap. This would be their first acquisition.

They believed they could solve the risks as they materialized and did not want to waste time. They engaged a team to do commercial and technological due diligence and bought the business.

They speedily approached the integration by reallocating key employees internally, believing the team could do it and deliver to their customers.

The integration floundered, customers got frustrated with the delays caused by the lack of availability of the engineers, and key members of the acquired commercial and technical team left to join a competitor.

Conclusion

Understanding the four stages within the Incremental Growth phase can provide valuable insights into the behavior, decision-making, and actions required to navigate the business during this growth phase successfully.

It can take many years to fully traverse this phase, with a focus on the opportunities being assumed as a reward for all the years of hard work and sacrifice. The dangers and stages ahead can often be discounted or misunderstood.

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by Adrian

The Startup Phase of the Business Cycle & Its Useful 4 Emotional Stages

In entrepreneurship, understanding the business cycle guides leaders through to startup success. This blog aims to dissect the startup phase, specifically focusing on what it feels like as the entrepreneur moves through them. Each stage within the startup phase has unique behaviors and requires specific actions to effectively harness their potential and progress. During the startup phase, Entrepreneurs spend time and money with more going out than what is coming in – this drives the behaviors and their evolution.

Later, we explore how established middle-market companies find themselves going through the next iteration of the startup phase.

The 'Butterflies' Stage: Excitement Tinged with Uncertainty

Signature Behaviors

The ‘butterflies’ stage marks the maiden voyage of a startup. Entrepreneurs in this phase, brimming with optimism and excitement yet apprehensive about the road ahead, are fiercely focused on their vision with an occasional challenge to delegate effectively. They focus intensely, and their conduct is perceived as extremely desperate to prosper their business.

Decision Making

It is quick, often by ‘gut feel,’ acting with confidence and minimum data with a bias towards action to achieve the vision. They often underestimate the effort required. They can be intense and focus on multiple projects at a time, missing details and with blind faith that everything will work out.

Action Plan for Progress Along the Cycle

To navigate this stage, entrepreneurs should:

1. Set realistic expectations while maintaining strong ambition.
2. Use strategic planning to build a clear roadmap toward their vision and break down the startup phase into small steps enabling momentum.
3. Begin building a competent team and assign responsibilities commensurate with their abilities. They should also create a skilled team of external advisors to keep momentum.

Example: Gourmet Foods Company

Gourmet Foods, a boutique food distributor, effectively managed this delicate phase. They conducted extensive market research, created niches in several upscale markets, and formed a goal-oriented team to determine which would gather traction first.

The 'Impatience' Stage: The Race for Momentum

Signature Behaviors

As a company moves from the ‘Butterflies’ stage into implementation. Often this stage is characterized by a great sense of impatience and feelings of momentum, as there is much to do!. Often this frantic behavior is created by an extensive to-do list. There is much to do! From getting the company set up, the bank accounts established and seeing customers or fitting out a location to attract them. Risks taken and investments made are in hope at a frantic pace and increasingly dispersed over time.

Decision Making

Decision making remains quick, but can become scattered as owners and employees alike over-promise as they underestimate the effort required. Urgency builds slowly at first as they try to get everything done. Cash and time continue to be spent to gain revenue traction.

Action Plan for Progress

To tame this impatience, leaders should:

1. Be focused on the specific activities that will generate revenue in the future. Impatience often drives activities wide as the separation and impatience build.
2. Have a plan and work the plan. Learn from what works, focus on these, and try everything simultaneously.
3. Encourage an open communication culture emphasizing feedback from consumers and team members.

Example: Interior Furnishings Company

An office furniture retailer offers a compelling portrait of managing the impatience phase. They emphasized sustainable growth, one item sale at a time, building customer confidence that they could deliver when promised and that their products were of the required quality and arrived without damage. They integrated customer feedback into their products for continuous improvement.

The 'Anxiety' Stage: Tackling Fears and Doubts

Signature Behaviors

As impatience builds, this becomes bubbling anxiety, characterized by self-doubt and fear of failure. These feelings often stifle progress. This phase may compel entrepreneurs to be risk-averse, question their capabilities, and often leads to neglecting their health and well-being. Frequently the owner explores their decision options, business model, market, and why they have yet to have the success they dreamed about when starting the business.

The business is at the cusp of a key tipping point. The business owner will either become confident in their business, or resign to failure. Some young organizations pivot at this point and retune their business model and effectively restart their business.

Decision Making

It starts to change depending on the decision in front of them. Cashflow has become tight with the growing angst that can stall spending as enough revenue has yet to kick in.

At this stage, a business can stall as it feels appropriate not to spend any more until it starts improving. If the stall is prolonged, the company will initially plateau and decline to close.

Action Plan for Progress

To address these concerns, leaders must:

1. Be self-honest. Is there demand in the form, or is the concept new and too out there for most?
2. Build the business infrastructure required to support the next phase of business growth.
3. Cultivate a balanced attitude, viewing setbacks as stepping stones for learning.
4. ‘Act as if’ they are successful, persevere and keep focused. Set a deadline for the business to respond.
5. Monitor stress levels, maintain work-life balance, and prioritize self-care, including expressing their feelings.

Example: Green Cleaning Solutions

Green Cleaning Solutions, a boutique cleaning service, focused on educating its target market on why they should spend a little more by using their alternative to the traditional cleaning approaches. They leveraged industry partnerships, embracing learning from how people reacted to their marketing messages. They focused their marketing activities on those companies that wanted their suppliers and service vendors to help them be green.

The 'Confidence' Stage: Capitalizing on Momentum

Signature Behaviors

During the anxious stage, there is a tipping point where the entrepreneur becomes confident and can see that the business and its model will be successful and continue to gather momentum and stability. In addition to confidence, a sense of relief that there is a future for the business.

Investments at this stage are made confidently, whereas before this stage, decisions and investments were made with hope.

Decision Making

Most of the decision-making at this stage focuses on investments, such as hiring people, extending a lease, and buying more stock. The mistake often made is to focus on the immediate term rather than review the business plan or consider what it requires beyond tomorrow.

Action Plan for Progress

In this phase, entrepreneurs ideally:

1. Review their plans and what investments are required for sustainable, predictable growth.
2. Prepare for a new frenetic activity phase caused by the growth investments.
3. Reconnect to the vision, celebrate milestones to boost team morale, and pave the path for future success.

Example: Pet Care Services

Pet Care Services is a small pet care and grooming service with 1 location. The business was set up as Pet owners increasingly wanted their pets to look good but lacked the time or the skill to achieve the desired look. They needed their facilities to be busy 80% of the time to start making money. During the previous phase of anxiousness, they researched their customer base issue. They realized they could get more frequent appointments and stronger utilization if they invested in a pick-up and drop-off facility. They initially rented a van, and as word got around, they could see that they could easily keep the grooming facility fully engaged. They invested in more staff, and their first leased van was outfitted to allow easy and safe transportation of their customer’s treasured pets.

Conclusion

The best leaders can recognize the emotional undercurrents that such a journey brings. They learn to recognize the initial butterflies, intermittent anxiety, impatience, confidence surges, and their team’s performance and decisions during each phase.

Understanding that the progressive stages within the startup phase of the business cycle are normal and that understanding them allows them to drive the business rather than the business driving them.

The business cycle offers an invaluable analytical tool, offering insights and targeted strategies to cope with each stage, effectively helping leaders channel their emotional responses into tangible business growth. By practicing these strategies, entrepreneurs from diverse sectors, especially at key tipping points, can process and employ their moving experience to accomplish sustained business success in the long run.

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by Adrian

Growth or Decline: Timing Your Business Cycle Strategy Makes the Difference

There are three cycles, often collapsed into a single cycle, that every business owner needs to be always aware of to make more profitable decisions. The three cycles are: 

•         The Economic Cycle
•         The Industry Cycle
•         The Business Growth Cycle

When you overlap all three cycles you now have very clear data on where exactly your business is. Having this clarity is the difference between maintaining a trajectory of continued growth and increasing profits vs. wasting a lot of time, frustration, and money applying the wrong strategy at the wrong stage.

The Economic Cycle

The economy is constantly changing and evolving, which means that it is also constantly moving through a series of different stages. The economic cycle is the movement of the economy through these stages, which can be divided into four distinct phases: expansion, peak, recession, and contraction.

We can think of the economy as a weather system, with clouds and rain and sunshine all competing for attention. This gives rise to patterns of behavior that recur over time and seem to follow similar patterns each time they happen. We receive news on a daily basis that relates to the global economy, the national economy and our local economy. 

The Industry Cycle

Because industries operate within their own separate economic environments, they also experience their own cycles. These cycles often mirror the overall economic cycle, but they may also be influenced by other factors such as technology or government regulations.

The life of any industry can be described by an S-curve, which shows how revenue and profit grow over time before flattening out and declining towards the end of the cycle. An industry's cycle can be broken down into four stages: expansion, maturity, contraction, and decline similar to the economic cycle.

The Business Growth Cycle Model

In addition, the Economic and Industry Cycles each business goes through its own cycle. The model identifies six key phases of the first pass through on the Business Cycles Model that will determine the strategy, and therefore steps, the business needs to take.

These phases are:

1. Startup / Redesign
2. Incremental Growth
3. Accelerated Growth
4. Future Growth
5. Plateau
6. Decline

Startup

The first time the business enters the Startup phase, it is just getting off the ground. The company's owners are typically working long hours and they are learning about their business and their customers. This is an exciting time for the owner(s), who may be dreaming about how big their business will become and what it will mean to them financially.

The feelings associated during this phase range from excited to anxious and the resulting behaviors often include frantic and desperation driving the need to try lots of things to get through this stage.

Read more about Startup the first time around

Read more about Middle Market companies entering a new Startup phase 

Incremental Growth

Incremental growth is the stage when a business gradually grows and there are typically steady improvements in sales. This phase is entered as the business proves it is viable.

At this phase a business grows from existing customers by serving them better and encouraging them to spend more money as well as adding new customers. The business will make systematic small changes that improve the customer experience and encourage repeat purchases.

The feelings associated during this phase include confidence, relaxed, to that of winning the lottery. The behaviors this creates range from frantically spending and taking increasingly larger and bolder risks.  There is a significant tipping point as this phase comes to an end and mistakes are often made as the feeling of winning the lottery can make the owners and leadership team feel bullet proof.

Read more about the Incremental Growth phase

Accelerated Growth

This phase can be challenging for businesses. What happens here sets the stage for where they end up – growth or decline. Many businesses are not well prepared for this phase and often attempt to manage it by applying the wrong strategies.

Here the business' growth cycle is a period of rapid growth and is capital intensive.

The company is hiring new employees at a rapid pace, the culture becomes stressed and communication suffers. The management starts to look for ways to reduce costs without sacrificing quality or performance, yet they are often unable to keep up with demand or maintain quality standards. Staff starts to leave; management spends all day playing whack a mole and in closed door meetings trying to fix the issues.

The transition to the next phase can be brutal and a business often stalls as it is transitioning into the next era such as becoming a true Middle Market sized company. What it does now determines its ongoing trajectory.

The feelings associated during this phase include tired, frustrated, stressed and disillusioned. The resulting behaviors can turn the culture toxic, develop a blame culture, and key employees often leave.

Businesses in this phase are at a critical tipping point and what it does now determines if it lands successfully into Future Growth or if it plateaus and declines.

Read more about the Accelerated Growth phase

From here the business will enter one of three possible trajectories:

Future Growth

The business has successfully traversed the Accelerated Growth phase and has made the right investments and implemented the right strategies to continue growing.

The business has evolved its management and leadership approach and is run very differently to prior phases. It has adequate operating capital, makes strategic investments, has a good culture, and profits.

This is often the best place to sell, but can feel counter intuitive.

The feelings associated with this phase are typically pride and curiosity about the next phase of the business growth and the next business cycle. The business is managed in a disciplined manner and professional behavior.

Read more about the Future Growth phase

Plateau

The business hasn’t implemented the right strategies yet and is in The Plateau phase. The company has reached its peak and is no longer growing. There is still time. If a business does not change, it will ultimately decline and die.

The Plateau phase can be caused by several factors. One of these is that the business has reached its saturation point, meaning that there are no more customers to acquire or sell to. Another reason can be that the company has become complacent with its current products and services and is not making any major changes or improvements to them.

The feelings associated with this phase typically start with contentment because the business is stable but will soon lead to anxiousness and feeling trapped. The behaviors develop into an unwillingness to change and resignation that this is it.

Decline

Decline is the point at which a business can no longer sustain its current level of growth. It's also the stage in which an organization begins to lose market share and needs to make decisions about its future.

The decline phase can be triggered by a number of factors such as decreasing demand for products or services, declining profits, inability to innovate, or lack of competitive advantage.

At this phase the business is on a downward trajectory. This is often when a business owner considers selling and handing the problem of revitalizing the growth to someone else.

The feelings associated with this phase include fear, lack of motivation, insecurity and exhaustion. Behaviors can become irrational and desperate.

Conclusion

The life of a business owner is rarely a dull one. They are often in the position to make decisions that have far-reaching impacts on both their business and their family's life. They need to be aware of external factors and cycles that will influence their business and have the knowledge to manage it through the various cycles that you will no doubt go through.

 

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by Adrian