In the work that I do, mentoring owner-led businesses, I regularly see significant pinch points (in terms of profitability) as those businesses grow, times when the business model doesn’t work. They are “wrongsized”.
The first tends to come as the business grows beyond 5 or 6 people. The challenge is the founder’s willingness delegate to his team. Many do this seamlessly, a few struggle.
Another pinch point comes when the business gets to 25 to 35 people, be they employees or a more distributed virtual team. No longer can everyone know everything, nor can any of them turn their hands to anything that needs doing. Specialisms are needed, yet often expectations don’t change. As the business model changes, the importance of each role increases. The business is departmentalising. and it needs different specialised skills. That’s hard because either the existing generalists need to specialise or leave. Change, difficult emotional change, is needed. In addition, the business now needs processes, rules, protocols in order to provide the framework that is needed to give certainty and clarity. Those changes feel constraining, controlling, even oppressive, yet once in place they facilitate and simplify the repetitive, improving quality.
A few businesses do this seamlessly too, many, perhaps most, struggle. Many also fluctuate staff numbers around this number, failing to break through before customer service suffers and revenue falls. Perhaps having between 25 and 35 people is an unstable, unsustainable, model. Many successful businesses have died by staying “wrongsized” for too long.
A willingness to recognise that change is needed is required. The old ways of working cannot continue. I often hear corridor conversations that pine for the old days. Of course, they can come back, if you accept lower revenues, job losses, and fewer customers, and ultimately for those that are still employed it may even feel like a success.
For the business though, the opportunities have been lost, and cannot be recovered. Boldness, accepting and planning for the challenge, and the loss of profits that are inevitable in the transition, will lift the business to the next level, and bring much more prosperity when it is done. That needs great vision and supportive determination to achieve it. If your business is “wrongsized”, you better get on with it.