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Why Entrepreneurs’ Dream of Hypergrowth Fast Becomes A Nightmare

Rapid growth is the stuff most entrepreneurs dream about as they take their fledgling company through the early years but when it happens, it can quickly become the stuff of nightmares.

The bubbles in the celebratory champagne—“Here’s to our success!”—barely have time to go flat before the problems arise across the high-impact growth or Scale Up business.

Suddenly owners are beset by problems involving the people they’ve hired or not hired, their cashflow chokes, and processes that once worked so smoothly groan to a halt. Customers then leave snide reviews because products or services aren’t delivered on time, and key suppliers get angry at delayed payments. Bankers who were once so keen for business begin to crank up the pressure as overdrafts or loans get close to the ‘red zone’.

No wonder then that so many business owners spend hours every night staring into the darkness wondering what on earth happened to their once easy-to-manage business.

The owners of high impact growth or Scaled Up businesses are often the loneliest, most isolated and overworked individuals. While start-up owners get an avalanche of government help and assistance, their Scaled Up counterparts get very little attention or assistance.

The CFO Centre’s Chairman Colin Mills says he’s seen first-hand what pressure does to business owners.

“I’ve sat in sales meetings with entrepreneurs who had literally been brought to tears by stress and frustration and the feeling that it’s all too much.”

It’s for this reason that Colin has written Scale Up: How to Take Your Business to the Next Level Without Losing Control and Running Out of Cash.

It’s aimed at the owners of companies facing or already experiencing the problems of scaling their businesses to ensure they minimise the problems and achieve growth in a controlled, sustained way.

“Our experience suggests that scaleup issues start to bite at about £1M/$1M Sales Revenue or a minimum of 10 employees,” he explains.

“By the time a business reaches £50M/$50M Sales Revenue or 250 employees (larger firms tend to have fewer employees per £/$ of Sales Revenue) they can most often be considered a “scaler”: they are past the main dangers of scaleup.”

In his book, Colin explains why scaling a business can be so problematic. The business owner has to deal with one or even all of the following:

  • People challenges
  • Sales and marketing challenges
  • Operational challenges
  • Administrative challenges
  • Financial challenges

Colin explains, “Businesses run the gauntlet of increasingly severe challenges, mostly because they are growing but don’t have the necessary infrastructure to support their expanded operations.

“While on paper, they may have the revenue, the manufacturing base or customer reach of a substantial business, the culture, the controls, the processes, the personnel and the leadership remain those of a much smaller business that they were a short time before.

“Worse, they haven’t yet accumulated the resources to build and maintain that infrastructure.”

This creates a hazardous situation for the business, he says.

“The biggest danger in this period is that the business will either outrun itself or get stuck, like a deer in headlights. Outrun, as the company spirals out of control and its cash reserves dwindle trying to meet the expanded demands of the business.

“Or stuck, as the entrepreneur tries to cope with everything at once, frustrated that the problems he could happily once deal with—back when the business was smaller—are not being dealt with by the people he is employing, often at substantial cost.”

Overcoming such problems or avoiding them is only possible if you revise your business model.

“You need to consider your whole business model, because if you have a terrible business model, then the last thing you want to do is to start scaling it. If you do that, then all the small problems that make your life a nightmare now will become major headaches.

“If your business model isn’t great, however, it doesn’t mean that all is lost: there’s a lot you can do to retrofit, design and redesign a business.”

Besides explaining the challenges scaling businesses face, Colin also provides the methods you need to use to overcome them—the same methods that the CFOs from the CFO Centre offers its clients.

They’re also the methods the CFO Centre has used in its own scaling up process, says Colin.

The CFO Centre is a scaleup that has been growing at over 30% for the last three years with close on 400 CFOs but Colin admits he keeps a keen focus on the business, the business model and the key performance indicators.

“It might be a scaleup now, but that doesn’t mean to say it’s not going to career out of control. I have to keep my eyes on the business, re-evaluate the business model, watch the indicators.”

Along with practical advice that you can use immediately, the book features an array of case studies in which business owners describe how they overcame the challenges of scaling their businesses.

So, if your business is on the verge of or already experiencing the ‘difficult teenage’ phase and you’re wondering how to overcome the nightmare challenges you’re facing, this book is for you.

It’s available on Amazon as a paperback and Kindle ebook here.

And to discover how The CFO Centre will help your company to scale up, please call us on +65 9776 0969 or contact us here.

Why ‘discipline’ wins over ‘innovation’ as the key characteristic of highly successful business owners…

You might well know how to grow (i.e. do more of the things that are working for you, and do them better) but as a seasoned entrepreneur, you tend to instinctively want to hold back a bit…
Why?

It’s chiefly a case of paranoia…

Business owners tend to be more paranoid than they let on. They don’t like to be regarded as paranoid so they often hide it.

What are the causes of success? Is it luck or talent? Is it genius or hard work? Is it creativity or plain diligence?

Jim Collins, the veteran author of Good to Great, and Morten Hansen believe that it comes down to control and discipline in the face of inevitable change. Luck, both good and bad, will befall us, circumstance will be as fickle as the weather. But if we put our heads down, we can thrive.

Their book starts with a definition of what the authors call ’10X’ companies, those that outperform their industry averages by at least 10 times. These companies display three fundamental and distinctive behaviours: ‘fanatic discipline’ and ‘monomaniacal’ focus on achieving their goals; ’empirical creativity’, an obsession with facts rather than opinion and a readiness to ignore conventional wisdom once armed with these facts; and ‘productive paranoia’, constant worry which fuels relentless preparation and precautions against even the most improbable bad events.

They draw on examples from business and beyond to illustrate 10Xers at work, such as Amundsen and Scott’s race to the South Pole. While Scott took a relaxed, somewhat cavalier approach to his expedition, Amundsen prepared for every eventuality, even having back-up plans for his back-up plans. He was a relentless ‘tester’ – he ate raw dolphin meat to see if it could provide a decent energy supply. He loaded up with far more supplies than Scott to serve a much smaller team. And, tellingly, for Collins and Hansen, Scott took just one thermometer, which disastrously broke, whereas Amundsen brought four.

Amundsen reached the pole more than a month before Scott and made it back alive. ‘Amundsen and Scott achieved dramatically different outcomes,’ Collins and Hansen write, ‘because they displayed very different behaviours.’

The same applies to companies and helps explain why Southwest Airlines thumped its discount rivals and why Microsoft thumped Apple in the mid-1980s to 1990s. Bill Gates used to keep a photograph of Henry Ford in his office to remind himself of how Ford had been overtaken by General Motors in the early days of the car industry. Gates wanted the constant reminder that, however well Microsoft did, there was almost certainly some younger version of himself toiling in obscurity to one day knock him from his perch.

Armed with these behaviours, 10X companies set off on what Collins and Hansen call the ’20 mile march’, a long period of sustained growth, characterised by hitting well-defined performance targets and demonstrating both resolve and control. Through the discipline of behaving consistently over time and proving resistant to a changing marketplace, an organisation discovers self-control. And this, far more than more nebulous ideas such as innovation or creativity, is what determines 10X success.

They compare the process of successful innovation to firing bullets in order to zone in on your target, then heaving a cannonball at it to do the job properly. Disasters happen when one uncalibrated cannonball after another is fired, each big, reckless bet made in the hope of recovering from the last one.

One of the most important lessons in the book is that innovation is not always the surest route to success. In their comparisons of companies in the same industry, notably the biotech firms Amgen and Genentech, Collins and Hansen found that it was the less innovative firm, Amgen, that generated better returns for investors over 20 years. Sometimes, it serves companies to be ‘one fad behind’.

Consistent with this idea is the authors’ assertion that the 10X companies are not the brash risk-takers, but the ones that prepare rigorously for what they cannot predict, the antithesis of many Wall Street banks before the financial collapse. These companies hoard cash and keep comfortable buffers in every area of their business, just in case. They are hyper-realists, who act according to Collins and Hansen’s ‘SMaC’ methodology, being ‘Specific, Methodical and Consistent’.

‘Luck is not a strategy,’ the authors conclude. What determines any organisation’s success is how it prepares for both good and bad luck. They call this getting a ‘positive return’ on luck and, if Good to Great’s four million-plus sales are anything to go by, this idea will be embedded in corporate-speak before you know it.

The FD Centre divides a finance department into 12 areas (we call the ‘12 Boxes’). One of these boxes is ‘Risk Management’. Amundsen’s success reaching the South Pole was largely down to the exceptional way in which he managed his downside/risk to stack the cards heavily in favour of him succeeding.

If you would like to book a 30 min call with one of the top FDs in the country to discuss ‘Risk’ and how you can create a powerful risk management strategy in your business to help you grow much faster and make bolder decisions because you know you have your back covered follow the link below:

http://fdcentre-dev.8fifty4.com/financebreakthroughsession/

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