Here’s something that I tell clients who are starting their businesses to think carefully about.
Lots of entreperneurs – as their business is growing – don’t necessarily want to expand and scale their business as quickly as possible. If you enjoy the interactions with your customers, being personally involved in the day to day operations of the business, and connecting with your local community, you might lose much of that if you expand quickly.
What I always advise my clients is to “Begin with the end in mind.” I can’t take credit for that expression – it came from Steven Covey. Although Covey wasn’t specifically talking about starting a business, it applies equally here. In my experience, Many entrepreneurs don’t think in terms of what they want their exit from the business to look like, until the moment is nearly upon them. And that’s generally not a good thing.
Because many of your daily decisions about your business affect your ability to successfully grow and manage and yes, exit your business, when the time comes. I can think of a few examples, but if you think this through for your own business, you’ll see what I mean.
Let’s take something as basic as how and where you find funding. Let’s say your goal is to successfully sell your business or go IPO. In that case, you may want to aggressively look for external funding from angel investors, family offices, and even VCs. That will give you the cash to (ideally at least!) rapidly expand your business, showing amazing fast growth and producing the multiples that might lead to a lucrative exit.
But the truth is that many entrepreneurs LOVE their business. Many, many are the entrepreneurs who believe they want to scale their business and grow rapidly. That will make external investors happy. And if your goal is to make a bunch of money and move onto to your next venture or retire early, that’s great. But all too often, the entrepreneur finds that it doesn’t make him or her very happy. It often quickly pushes the entrepreneur founder into roles that are not nearly as much fun, are not very connected to the day to day hustle and bustle of production and interacting with customers. Suddenly, the entrepreneur spends more time hiring people, delegating things to others, and focusing on policies and procedures and administrative headaches. Remember, the goal for the founder is to make himself or herself essentially replaceable, so that the business can continue running in the future without them at the helm. That’s the cold reality – if your business is acquired by a strategic, they may want you around for a short transition, but are often eager to start integrating the business into their own company. If you go IPO, unless you are also a very effective manager and leader, your board or shareholders will often start pushing you out the door.
The truth is that many people who are great at starting a business and even running a small business aren’t very good at scaling the business and running a larger enterprise. And I believe – from the many entnrepreneurs I’ve worked with – that many of them have such a hard time extracting themselves from their business – their BABY – that it gets in the way of the scaling that is needed for rapid growth.
I love Elaine’s clarity about Luft Balloons – she realizes that it is her baby, and that she not only makes good money for herself and for her team, with whom she is close – but gives her a great deal of personal satisfaction. I suppose some people (rather sneeringly, I think) call this a “lifestyle business.” I think we need to come up with a better name that gives this option the respect it deserves. There is nothing magical about “scaling” nor is there anything AT ALL wrong with creating a thriving business that you, the founder, are in the middle of and want to stay in the middle of for a long time – maybe a very long time. And there’s another way the end game affects your daily decisions – if you want to stay small, you might hire generalists and people who thrive in a small, family-like environment. But if you want to scale, you will probably want different people – hard-chargers, maybe, or people with experience managing larger departments, probably people with more specialized expertise.
I think the hard part is that many entrepreneurs don’t always know what they want when they start. Many say they want to scale their business quickly (maybe because we’ve all been a bit brainwashed by the tech industry talking about huge IPO numbers), but when push comes to shove, that isn’t really want they find they really want. But it sure helps if you have done some real soul-searching ahead of time or at least early on. The world is full of founders who thought they wanted to scale and brought in external investors, only to find they have lost a lot of control over how the business grows. Or, they’ve actually hired the wrong people.
Take the time to step back and answer as honestly as you can, “What makes me happy? What are the kinds of activities that I’m really good at and enjoy the most?”
And design your business around that. Because if it’s not fun, what’s the point?