Friday Commentary: Principles of Smart Business Growth
Welcome to the Friday Commentary. In this series every Friday experts will shine a light on the digital industry. Where are we heading, what is going on and how should we approach this as decision makers? This Friday it is the turn of one of our old writers, Paddy Moogan, from Distilled.
A few months ago, I officially moved into a new job role at Distilled which sees me focusing on growing the business. Specifically, I’m working with some of the smaller service teams to help them grow through improving how they market their service, how they sell it and how they deliver it. This has led me to reading a lot about business growth, as well as speaking to people in other industries but similar job roles to see how they’ve approached challenges in business growth. Alongside this, I’ve enrolled in an online course by Coursera on business growth taught by Edward Hess who has written a number of books on the topic.
For today’s post, I want to share a small part of what I’ve learned in this course and in my role so far. Having spoken to just a handful of people in the industry in the last few months, it seems like business growth in relation to digital companies is an area of interest but not blogged about often in our circles.
Specifically, I want to talk about the four P’s of business growth:
I’m going to go into some detail about these and add my own experience to the mix. If you enjoy this kind of topic, I’d highly recommend you checkout the course itself.
Planning is always tricky and a lot of the time, you’re trying to plan for the unknown. It is near impossible to know what is going to happen in the next few months for your business, let alone the next few years. At the same time, you can take steps to plan for many of the things that may happen so that your business can scale. Essentially, you’re trying to put the building blocks in place so that when everything comes together and you experience strong growth, you’re not being held back by basic things that could have been predicted.
Structure in terms of people
As your business grows, you’re probably going to want to add more people. If you’re an online marketing company, this may mean adding more Consultants who can handle client work or it may mean hiring more sales people to handle leads and pitches. Whatever roles you need to add, you need to think ahead and visualise what the structure of the company may look like in a few years time if things go well. There are a few things you can look for here in order to recognise when planning and processes are needed.
There are only a limited number of hours in the day to get work done and more importantly (for me anyway) there is only a limited amount of headspace that a single person has. When it comes to managing a team on a day-to-day basis, there is a point at which the size of the team becomes too big for a single person to manage effectively. The problem is that this point can be hard to recognise sometimes because the knock-on effects can be hard to see. Essentially, when a manager can’t manage their team effectively, a few things happen:
- Team members feel less valued because they aren’t given much time or attention
- Team members lack direction in both work and their personal development
- The team members that shout the loudest often get the most attention
In his course, Edward Hess feels that once a single person is managing 7-9 people, it is time to change things as this can be too many. I’d actually go a bit lower than this and say that I’d prefer for managers to have a maximum of 5-6 people to directly manage at one time but this is just based on personal experience and the way we try to set things up at Distilled.
Size inflection points
Every business will experience problems at some point or another when adding people. It is easy to think that you’re the only company who experience problems when growing but when you look a bit wider, you can see how other companies (no matter what their industry) experience problems at certain points. It took me a while to understand and appreciate this but once I did, it actually made me feel better about things! Hess outlined a few inflection points that he has observed in his experience:
- 7-9 people
- 20-25 people
- 45-50 people
Depending on what you read, these numbers can change, but the point is that you need to be aware of the problems that growth can present and plan for this as much as possible. You need to think a few years ahead and map out what your people structure may look like. How many of these inflection points will you pass? How many times will you need to restructure and change how teams are managed? Tying this back to digital again, do you think that you’ll need to build out teams that focus on specific services such as analytics or email marketing? Or can these sit within the structure of existing teams?
Supporting job roles
When a company is small, it can be quite lean in terms of job roles that are not directly revenue generated. In the context of a digital marketing company, it is most likely to be the SEOs or Consultants that are directly billable to clients. The same can’t be said for people like:
- Office managers
- Sales teams
- Finance teams
Although as a company grows, these people are often needed just as much as the staff who can be directly billed to clients. In the early days of business growth, the founder or co-founders of a company will often take care of things such as invoicing, sales, HR and hiring. This just doesn’t scale though and eventually, support staff are needed.
You can take a good guess at when you may need these people if you can visualise what your company structure may look like in a few years time. You can look at how these business tasks are handled right now, who does them and whether it is that person’s job and how much time it currently takes. If the answer is that it’s not that person’s job and it is taking a decent chunk of time, then chances are that you need to plan for someone to dedicate themselves to that position in the near future!
I love the quote above from Hess, mainly because I’ve often put myself under pressure to get everything done and it took me a while to realise the importance of focusing on what is a priority. It can be too easy to feel like everything is a priority but in all honesty, this isn’t true. As a business grows, it becomes more and more important to have the ability to prioritise and know how to make best use of your time.
There are two core ways to think about prioritization.
The idea here is to prioritize activity that fits with the overall strategy of the company. For example, if part of your strategy is to expand into paid search or paid social services, you may want to prioritise hiring people into this team over other teams. I really like how Hess defines this kind of focus, he says that you should paint a target that is two inches wide and two miles deep and for it. Don’t allow yourself to get distracted by things that are outside of this target and go really, really deep on focusing on it.
This is particularly important if you’re quite senior in a company and there are lots of demands for your time. This tends to happen quite naturally as your career progresses and the team below you grows. There are two core questions that you need to answer here in order to prioritise effectively:
What fires need to be put out?
Stuff goes wrong all the time and you can’t plan for everything. So we often end up running around putting out fires and helping others. There is nothing wrong with this however you need to be able to prioritise and fight the biggest fires first. Also, as Hess puts it, you need to leave the fire extinguisher behind! You can’t be spending time putting out the same fires over and over again, so you need to teach others how to do it or put processes / systems in place that prevent them from happening in the first place.
Where are the bottlenecks?
You also need to be able to identify the bottlenecks in your business that may be holding you back. Sometimes these bottlenecks may be people (possibly you!), sometimes they will be a certain process. With my current team at Distilled, I like asking them pretty openly about what is holding them back. Framing it as something like “what is stopping you from doubling the size of your team over the next 12 months” is a nice way of doing it because it encourages them to think bigger.
Once you’ve identified the bottlenecks to growth, you need to set these these as priorities that you’re going to focus on. Ask yourself the following question:
“If I work on just these things and nothing else in the next few weeks (or months), will it help the team solve problems, open the bottlenecks and grow?”
If the honest answer is yes, then you can put other ideas to one side and maintain a good level of focus on these priorities.
The geek inside me loves processes. I believe pretty strongly in having the right processes and whilst some companies may detest the idea of processes, I think they become essential for every business as they grow. Sure you can get by without them for a while, but as you add people, clients and revenue, you need processes.
A process can be something as simple as a checklist or a set of instructions. One of the most famous and consistent examples of a checklist is the one used by airplane pilots each and every time they fly. Before every flight, a pilot will have to run through a checklist to ensure that the airplane and crew are in a good state to fly. With hundreds of lives at risk if something goes wrong, these checklists are a way of making sure that small (but vital) details are not forgotten about.
Essentially, checklists and processes help protect against human error. We’re all human, we forget things and make mistakes, so checklists can protect us against this.
In the context of a business and outputs, processes and checklists help reduce variance in your work. This is particularly important as you grow and add more team members because you need to maintain a high level of quality. Bringing this back to digital, you may have a checklist or process for reviewing Google AdWords accounts so that basic things don’t get neglected or forgotten about. This can then be used by new team members as they join. The key here if you’re a Consultancy is that you’re still giving freedom to your staff to be strategic and use their experience, but the checklist or process allows them to easily cover the basics and not have to remember everything. If you expect people to remember everything, they won’t have enough headspace to think strategically.
“The management challenge is when to let up on the (growth) gas pedal and let people and processes catch up to the growth.”
This is one of the areas where I got some surprising insights from the course. Now that I think about them, they make total sense. For example, growth isn’t linear. We tend to think of growth as looking like this:
Whereas in reality, it probably looks more like this:
The data backs this up too, according to extensive research by Hess, the liklihood that a company will grow higher than average for four years running is less than 10%. For seven years or more it’s as low as 4%. This is quite different to what people expect and this needs to be remembered when growing a business, bumps in the road are going to happen and it’s important not to happen when they come along.
If you grow too fast, it can be very dangerous to your business and perhaps even cause it to have to go backwards or even shut down. There are some very public examples of companies who grew too fast and suffered as a result. One of which is Starbucks who had to close 600 stores in 2007 and admitted to losing some of it’s core brand values in the quest for growth. Growth can be destructive if it’s not handled properly and end up being costly.
Growth is also a tactic, it is something that you actively decide to pursue as opposed to assuming it will happen naturally. The decision to grow should be a conscious one after weighing up the pros and cons. It should be planned as much as possible and removed enough so that serious damage can’t be caused to the rest of the business if something goes wrong.
Going back to the idea of pace, Hess uses a great analogy which is that of the gas pedal in a car. You can keep your foot on the gas pedal of a car and rev the engine non-stop, but at some point, you’re going to have to ease up and slow down otherwise the engine is going to be damaged.
When it comes to business growth, you need to pace growth so that people, processes and systems are able to catchup. If you grow too fast for any of these things, then they can break. This is particularly problematic when you grow too quickly for your people and they end up becoming stressed and unhappy as a result.
To summarise, growth can be hard and present you with many challenges if you don’t remember the 4 P’s outlined above. There are of course other things to take into consideration when trying to grow your business and I’ll go into some detail on those in future posts. In the meantime, feel free to leave any questions or feedback in the comments below.