By Erik Huberman - Entrepreneur.com
If you want your company to navigate change successfully, learn to thrive on uncertainty.
Even the big guys get it wrong sometimes: Microsoft has a rich history of promising big tech but failing to deliver -- a failing that has made audiences hesitant to take the tech giant at its word.
While Apple keeps its finger on the pulse of consumers, Microsoft often falls behind in translating innovative ideas (such as tablets and smartphones) to demand. Remember the Windows phone? What about Microsoft’s early tablets before the iPad blew everyone, including Microsoft, away?
Perhaps that software giant will turn the tide on its next consumer device; but if it wants to outsell Apple, it will need to evolve its strategy.
Whether you're a large or small company, you can’t maintain the status quo during periods of growth and expect things to work out. When it’s time to scale, you can either adapt quickly -- or watch the competition outmaneuver your outdated tactics.
Growing startups become entirely new companies.If you don’t adapt, your entire business could crumble.
When you hire your first employee, you'll see a big shift in how you work. Your second employee will be more of the same; and your third employee will change things again. When you get to eight, another shift will occur. At 16, you'll see yet another shift. When you double your revenue, another one will occur.
Every time you hit a new threshold, your business processes and culture can either evolve or stagnate. Evolution won’t happen on its own, though: You have to take charge of your own growth.
If you don’t keep your team updated, your people won’t know what to do with themselves. When your business model begins to hinder your profits, you can either double down on something you’ve outgrown or make the radical change necessary to keep pushing forward. The same is true of your marketing style and production methods: As your company scales, so must your processes.
How to know when it’s time to change.Tipping points don’t announce themselves. To adapt to change, you must understand that change is constant -- so your evolution must be constant, too.
Unfortunately, you can’t watch your peers go through change and use their notes to guide your strategy, because every company is different. You have to watch what’s happening within your company and understand which changes will address your current challenges.
Say your sales volume starts to skyrocket, but your customer satisfaction rates begin to dip. Do you need more customer service representatives or more people in order-fulfillment to ship packages? Only you know the answer.
As the leader of a growing startup, your job is more about managing the business than it is about selling or designing products. To scale sustainably and position your company to handle new growth, you must rethink how you anticipate and respond to change.
Prepare to adapt.For years, our company kept all employees on the phones, assuming that direct contact with clients was best. As it turned out, our creative people hated talking on the phone and weren’t very good at it. We thought we were brilliant, but we had actually created a situation where team members spent 33 percent of their time on a process that lost us clients and lowered our productivity. When we got bigger, we hired account managers, and everything became much smoother.
Follow these tips to avoid the unnecessary pains of scaling:
1. Build an organic plan -- but know it will change.
Draw out expectations for your revenue forecasts, profit expectations and business model, then extrapolate those numbers to predict the team needed to meet them. After that, check back on that plan every few months and adjust it to match the reality of your situation.
According to research in the Harvard Business Review, physically writing down a business plan increases the chance of its success by 16 percent. When my company received a buyout offer, I wrote down a plan for the next three years while I considered the option to sell. In the end, we didn’t sell, but a few years later, we had the exact team size we predicted -- plus an in-house lawyer, which along the way we'd discovered we needed.
2. Monitor growth costs against operating costs.
As you grow, working capital and marketing expenses outpace the lag on returns. When that happens, you have either too few people during your busy months or too many people during the slow ones. Keep an eye on those numbers to grow evenly.
Uneven growth can happen to anyone: Take, for instance, Crumbs Bake Shop, which invested in expansion -- until waning interest in cupcakes and the high cost of those physical stores forced the company to close all its locations. Avoid this fate yourself: Scale methodically.
3. Hire for culture and check in along the way.
When you scale quickly, sometimes you’ll take any warm body. Don’t sacrifice culture for immediate hires, though, or you’ll hurt your growth in the long run.
Facebook has purposely maintained its original culture, even after evolving from college startup to global empire. Netflix, too, follows the same key values it did when it made its money mailing DVDs in 2009.
4. Factor management into employee costs.
Managers cost more than entry-level employees. In people-heavy businesses, head count does not scale linearly. Keep at least one manager for roughly every seven skilled employees.
Make these hires ahead of time to save money. SHRM has reported that the average cost per hire is $4,129 and that the average position takes 42 days to fill. The faster you move, the more you save.
During our company's early days, I made 85 percent of our sales. We recognized the revenue cap that that created and spent nine months to hire and train an entire team of salespeople and marketers. Today, I’m responsible for only 3 percent of sales, and our team can scale with our needs.
Scaling can be scary, but that’s part of the fun. Embrace the unknown and plan for growth before it happens. Follow these tips to keep your company ahead of the game and to ensure that you drive your growth -- so that your growth doesn’t drive you.