Repetition
The leader ’ s final job is “ to keep the main thing the main thing .” In other words , keep the organization on message and keep everyone heading in the same direction .
Repetition encompasses consistency . Finish what you start . Mean what you say . And don ’ t say one thing and do something else . Consistency is an important aspect of repetition . A key function of leadership is delivering frequent messaging and metrics to reinforce these key attributes of the company and the culture .
SCALABLE INFRASTRUCTURE
As an organization grows , it becomes more complex . To keep things flowing , an organization needs a scalable infrastructure ( similar to the blood supply and the nervous system in the human body ). When you go from two employees to 10 , you need better phone systems and more structured space . When your company reaches 50 employees , you still need space and phones , and you suddenly also require an accounting system that shows more precisely which projects , customers , or products are actually making money . Between 50 and 350 employees , your information technology systems need to be upgraded and integrated . You must revamp them again as the organization attempts to tie all systems into one comprehensive database . Otherwise , a simple change of address by a customer can unleash a series of expensive mistakes .
MARKETING
The No . 1 functional barrier to scaling up is the lack of an effective marketing department , which needs to be separate from sales . Marketing is critical to both attracting new relationships to the business and to addressing the increased competitive pressures ( and eroded margins ) as you scale . To prevent margin erosion , marketing ’ s role ( with lots of customer input ) is to determine the right " what " you should be selling to the best " who ," and how you should sell it at the right price .
Ultimately , marketing ’ s job is to identify and attract the best ( right ) customers to the venture and arm the sales team ( or those driving your online marketing activities ) with a definitive list of prospects and plenty of information to help them make the sale . If not , sales teams ( distributors ) will chase any low-hanging fruit they can find , which is the quickest way to defocus the business and crush your margins .
MARKET DYNAMICS
There ’ s a counterintuitive market dynamic when you ’ re growing a business . As the firm scales from $ 1 million to $ 10 million in revenue , the senior team tends to be focused externally on amassing new business . Yet , this is precisely the time when a little more internal focus , to establish healthy organizational habits and a scalable infrastructure , would pay off in the long term . As the business scales past $ 10 million , organizational complexities tend to draw the attention of the senior team inward . This is precisely when the team needs to be focused more externally on the marketplace due to the increased competitive pressures that come with size .
There is also an important sequence of focus when it comes to your financial metrics . Between start up and the first million or two in revenue , the key driver is revenue . It ’ s between $ 1 million and $ 10 million that the team needs to focus on cash .
As the organization passes $ 10 million in revenue , new internal and external pressures come to the forefront . Externally , your organization is on more radar screens , alerting competitors to your threats . Customers are beginning to demand lower prices . At the same time , internal complexities increase , which cause costs to rise faster than revenue . All of this begins to squeeze an organization ’ s gross margin . As the gross margin slips a few points , the organization is starved of the extra money it needs in order to invest in infrastructure , like accounting systems and training . This creates a snowball effect of further expensive mistakes as the company passes the $ 25 million mark .
By the time it reaches $ 50 million in revenue , an organization should have enough experience and a strong enough position in the market to predict profitability accurately . At this stage , it is crucial that organizations generate predictable profit because profit swings of a few percentage points either way represent millions of dollars .
This brings us full circle to the main function of a business leader : to build a predictable revenue and profit engine in an unpredictable marketplace and world . Companies with steady growth year in and year out dramatically outperform those that experience wild swings in revenue and profits .
The spoils of victory go to those who maintain a steady pace in all kinds of weather and storms . And it ’ s this predictability , driven by effective processes , that is ultimately the key to crafting an organization that attracts and keeps top talent , creates products and services that satisfy customer needs , and generates significant wealth .
In summary , growing a business is a dynamic process as the leadership team navigates the evolutions and revolutions of growth . And like the growth stages of a child , they are predictable and unavoidable . To deal with these challenges , the company must grow the capabilities of the leadership team throughout the organization , install scalable infrastructure to manage the increasing complexities that come with growth , and stay on top of the market dynamics that affect the business .
For more information on successfully scaling your business , check out Verne Harnish ’ s book , “ Scaling Up : Why a Few Companies Make It ... and the Rest Don ’ t .”
Verne Harnish is the founder of the world-renowned Entrepreneurs ' Organization ( EO ), with over 13,000 members worldwide , and has chaired for 15 years the EO ' s premiere CEO program , the " Birthing of Giants ," a program in which he still teaches today . Founder and CEO of Scaling Up , a global executive education and coaching company with over 200 coaching partners on six continents , Verne has spent the past three decades helping companies scale up .
The " Growth Guy " syndicated columnist , he ' s the author of “ Scaling Up ( Rockefeller Habits 2.0 ),” “ Mastering the Rockefeller Habits ,” and , along with the editors of Fortune , “ The Greatest Business Decisions of All Time ,” for which Jim Collins wrote the foreword . Verne also chairs biannual Scale Up Summits and serves on several boards , including chairman of The Riordan Clinic and the newly launched Geoversity .
If you would like to see more , visit MSPsuccessmagazine . com / verne to see his exclusive interview with Technology Marketing Toolkit Founder and CEO , Robin Robins . n
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