Just like people, businesses go through growth stages. And, just like people, each stage has unique challenges and rewards – think five years old vs. 15 vs. 25 vs. 35. Just ten years can make a big difference in a businesses’ priorities, objectives, requirements, and goals.
The challenges and rewards of each phase require owners to grow and change along with their businesses. In order to stay competitive and create sustainable growth they must be flexible. Successful leaders adapt their thinking and strategies as they move through each cycle.
80% of all businesses fail because their owners did not understand, and were not prepared for, the different demands of each stage. It is not market conditions, bad luck or outside circumstances, it is self-destruction that closes or limits expansion in the majority of companies. Technology firms are no exception.
Many established tech companies are struggling because the owner(s) has reached the limits of his abilities. His skill and knowledge have carried him through the first two stages (Seed/Development and Startup). But, he is having a hard time in Stage 3 Growth and Organization.
In the 3rd phase, the business is stabilizing. It has improved cash flow and profit, a better mix of new and established clients, a functioning workforce and projects in various points of development. It also has an owner who is having a difficult time making the transition from engineer to leader and manager.
This stage requires big changes from the owner because being good at engineering is not enough to be successful anymore. The business no longer requires him just to be technically capable – it needs him to be a good leader also. Here are a few examples of the new leadership skills, abilities, and knowledge he must have.
• Understand and manage via financials – profit, cash flow and job costing
• Develop a recruiting, hiring and retention process
• Create an effective accountability framework
• Optimize sales and sales planning to generate new business
• Implement best practices to decrease scope creep, change orders, customer dissatisfaction
• Increase on-time and on-budget project efficiency
• Streamline internal and external communications
In this stage, someone has to step up and officially lead the company – someone who is a leader and manager first, and an engineer second. Tech company owners are notorious for being bad at doing this. Unfortunately, this is where the company starts to stall at best and break down at worst.
This makes the next three stages – Expansion, Maturity, and Exit – difficult or impossible to transition to. If the company is able to limp into a next phase the problems continue to grow (i.e., decreased or no profit, low quality, increased customer and employee dissatisfaction, little or no buy out money, chaotic workplace, high owner frustration/unhappiness).
Simply put, the concepts of first-rate engineering and first-rate business management are one and the same. Both are about understanding how things break or fail, then making sure that does not happen. You have to design before you build.
At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information: